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Packaging Corporation of America (PKG - Snapshot Report) reported strong fourth quarter 2012 results with net income of $61.0 million or 63 cents per share versus $39.5 million or 40 cents per share in the year-earlier quarter.

The year-over-year rise in earnings was primarily attributable to higher demand for corrugated products during the quarter, which helped the company to raise their prices. The reported earnings beat the Zacks Consensus Estimate by a penny. Excluding one-time items, net income was $59.0 million or 61 cents per share in fourth quarter 2012 compared to $39.5 million or 40 cents per share in the year-ago quarter.

For full year 2012, reported earnings were $163.8 million or $1.68 per share compared to $158.0 million or $1.57 in the prior year. Excluding one-time items, earnings for 2012 were $200.8 million or $2.06 per share compared to $161.8 million or $1.61 in 2011.


Net sales for the reported quarter were $736.6 million compared to $654.3 million in the year-ago period, representing a year-over-year increase of 12.6%. Net sales for fourth quarter 2012 exceeded the Zacks Consensus Estimate of $718 million.

Corrugated products’ shipments surged 5.8% per workday in the reported quarter, while total shipments increased 7.6% year over year. The production of containerboard jumped 12,000 tons year over year to 652,500 tons.

Net sales for full year 2012 increased 8.5% year over year to $2.8 billion as the company produced its full capacity of containerboards totaling 2.600 million tons. Containerboard inventories at year-end 2012 were about 6,000 tons higher on a year-over-year basis.

Balance Sheet and Cash Flow

Packaging Corporation generated $153 million in cash from operations, while capital expenditures were $34 million for the quarter. The company hiked its quarterly dividend for first quarter 2013 by 25% from $1.00 per share to $1.25. The company repurchased 103,000 shares during the fourth quarter, bringing its tally for the year to 1.5 million shares. Packaging Corporation ended the quarter with $207 million in cash.


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

However, in first quarter 2013, Packaging Corporation expect lower containerboard production and higher operating costs on a sequential basis with two less mill production days and annual maintenance downtime. Higher energy costs are also expected with cold weather patterns putting pressure on wood costs and availability. Furthermore, seasonality of products is expected to negatively affect corrugated products volume, partially offsetting higher average corrugated products prices. Consequently, the company expects first quarter earnings to be approximately 56 cents per share.

Packaging Corporation currently has a Zacks Rank #1 (Strong Buy). The company competes with several leading players in the industry such as International Paper Company (IP - Analyst Report) and Graphic Packaging Holding Company (GPK - Snapshot Report), both carrying Zacks Rank #1, and Rock-Tenn Co. (RKT - Analyst Report), which currently has a Zacks Rank #2 (Buy).

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