Back to top

Image: Bigstock

Why Is Packaging Corp. (PKG) Up 18.1% Since Last Earnings Report?

Read MoreHide Full Article

A month has gone by since the last earnings report for Packaging Corp. (PKG - Free Report) . Shares have added about 18.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Packaging Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Packaging Corp's Q3 Earnings & Sales Top Estimates

Packaging Corporation reported adjusted earnings per share of $1.57 in third-quarter 2020, surpassing the Zacks Consensus Estimate of $1.36. However, the reported figure declined 18.2% year over year.

This decline resulted from lower prices and mix in the Packaging and Paper segments, dismal volumes in the Paper segment, as well as higher scheduled maintenance outage costs. These negatives were partly offset by higher volumes in Packaging segment, lower operating costs as well as softer converting and other costs.

Including one-time items, earnings in the reported quarter came in at $1.46 per share compared with the prior-year quarter’s $1.89.

Operational Update

Sales for the September-end quarter declined 3.3% year over year to $1,694 million. The reported figure, however, beat the Zacks Consensus Estimate of $1,657 million.

Cost of products sold was up 0.6% year over year to $1,348 million in the third quarter. Gross profit went down 16% year over year to $345 million. Selling, general and administrative expenses came in at $127 million, marking a fall of 7.3%. Adjusted total segment operating income dipped 16.2% year over year to $223 million.

Segmental Performance

Packaging: Sales in this segment increased to $1,501 million from the $1,490 million recorded in the year-earlier period. Segmental income, excluding special items, came in at $236 million in the quarter compared with the $238 million witnessed in the prior-year period.

Printing Papers: This segment’s revenues slipped 27% year over year to $178 million in the third quarter. The segment reported adjusted operating profit of $7.3 million compared with the year-ago quarter’s $48.1 million.

Cash Position

The company had a cash balance of $949 million as of the end of the July-September quarter, up from the year-earlier quarter end’s figure of $738 million.

Outlook

Packaging Corporation has not issued any guidance for the fourth quarter given the uncertainty related to the pandemic and its impact on the global economy. The company expects to benefit from solid corrugated products demand in the remaining part of the current quarter. The company also expects higher freight and scheduled maintenance outage costs during the ongoing quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 37.45% due to these changes.

VGM Scores

Currently, Packaging Corp. has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Packaging Corp. has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Packaging Corporation of America (PKG) - free report >>

Published in