Back to top

Analyst Blog

Packaging Corporation of America (PKG - Snapshot Report) reported net income from continuing operations (excluding post-tax debt refinancing charges) of $53 million or 55 cents per share in the third quarter of 2012 versus a net income of $48 million or 49 cents per share in the second quarter of 2012, and a net income of $43 million or 43 cents per share in the year-earlier quarter. 

The rise in earnings was primarily led by increased volume of containerboards and corrugated products during the quarter. Additionally, the company also benefited from minimized energy, recycled fiber and chemical costs neutralizing the increased expense for labor and benefits. Although the company’s earnings surpassed management’s expectations, it missed the Zacks Consensus Estimate of 56 cents per share for the quarter.

GAAP EPS reported by the company was 41 cents per share compared to 42 cents per share in the previous year quarter and 46 cents per share in the last quarter.

Revenues

Net sales came to $723 million, up 8% year over year and 1.5% sequentially, beating the Zacks Consensus Estimate of $720 million.

Corrugated products’ shipments surged 5.7% year over year. Outside sales of containerboards increased from the year-earlier quarter. The production of Containerboard jumped 20,000 tons year over year to 670,000 tons while its inventories were 9,000 tons at the end of the quarter.

Margins

Gross profit in the quarter was $162.6 million, up 18.1% from the year-ago quarter. Gross margin came in at 22.5% in the third quarter of 2012 versus 20.5% in the year-ago quarter and 22.2% in the previous quarter. Selling and administrative expenses amounted to $51.5 million, up 5.3% from the previous year quarter.

Management stated that the company’s performance was impressive during the quarter. In addition, the quarter witnessed high demand for Packaging Corp’s containerboard and corrugated products and record production during the quarter.

Outlook

The company has raised the price of its domestic containerboard and it is also in the process of increasing the corrugated products price, which is expected to be completed in the upcoming quarter. Considering this price rise, management anticipates that earnings per share for the fourth quarter of 2012 will be roughly 61 cents. However, earnings during the quarter are likely to be adversely affected by high cost accruing from cold weather.

Our Recommendation

Packaging Corporation currently has a Zacks Rank #1, which implies a short-term (1-3 months) ‘Strong Buy’ rating on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%