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What's in the Offing for Packaging Corp's (PKG) Q1 Earnings?

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Packaging Corporation of America (PKG - Free Report) is set to release first-quarter 2021 results, after the closing bell on Apr 26.

Q4 Results

In the last reported quarter, Packaging Corporation’s earnings and revenues missed the Zacks Consensus Estimate. Both the top- and bottom-line figures declined year over year. This downside resulted from lower prices and mix in the Packaging and Paper segments, dismal volumes in the Paper segment, higher scheduled maintenance outage costs as well as higher freight expenses and a higher tax rate. These negatives were, however, partly offset by higher volumes in the Packaging segment and lower operating costs.

Q1 Estimates

The Zacks Consensus Estimate for Packaging Corporation’s first-quarter earnings per share is currently pegged at $1.48, suggesting a decline of 1.3% from the prior-year quarter. The Zacks Consensus Estimate for total sales is pinned at $1.74 billion, indicating growth of 1.8% from the year-ago period. The Zacks Consensus Estimate for the company’s quarterly earnings moved south over the past 30 days.

The company has trailing four-quarter average earnings surprise of 10.48%.

Factors to Note

Packaging products are essential for the distribution of food, beverage and pharmaceutical products. Hence, the elevated demand for meat, fruit and vegetables, processed food, beverages, medicine, and other consumer products owing to the coronavirus pandemic is expected to have aided the company’s Packaging segment’s first-quarter performance. The Zacks Consensus Estimate for the segment’s revenues is pegged at $1,590 million for the first quarter, calling for a year-over-year rise of 8.3%. The consensus mark for the company’s operating income is pinned at $233 million, indicating a year-over-year increase of 16%.

The company has been gaining from demand for packaging driven by the e-commerce boom. Additionally, the pandemic has been fueling e-commerce growth as consumers’ demand for online grocery, beverage and pharmaceuticals delivery services has been increasing, following travel restrictions imposed by governments worldwide. These factors might have contributed to the company’s performance during the January-March period.

Meanwhile, the pandemic has affected paper consumption in schools, offices and businesses, straining paper demand. Also, the paper segment continues to bear the brunt of bleak uncoated freesheet market. Further, the segment has been bearing the brunt of weak paper demand due to increasing preference for electronic data transmission, e-readers and electronic document storage alternatives. These are likely to get reflected in the company’s results for the quarter to be reported. The Zacks Consensus Estimate for the Paper segment’s revenues is pegged at $155 million for the March-end quarter, suggesting a year-over-year decline of 28.5%. The Zacks Consensus Estimate for the segment’s operating income is pegged at $12.5 million, which indicates a year-on-year plunge of 61.6%.

Moreover, elevated freight and labor costs, higher energy and wood costs, rising recycled fiber prices, material inflation, coupled with annual maintenance outage costs, might have dented the company’s margins in the March-end quarter.

What Our Model Indicates

Our proven model doesn’t conclusively predict an earnings beat for Packaging Corporation this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Packaging Corporation is -5.30%.

Zacks Rank: Packaging Corporation currently carries a Zacks Rank of 3.

Price Performance

In a year’s time, shares of Packaging Corporation have gained 64.6% compared with the industry’s growth of 56%.

Stocks Poised to Beat Earnings Estimates

Here are some Industrial Products stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Deere & Company (DE - Free Report) has an Earnings ESP of +7.02% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar Inc. (CAT - Free Report) has an Earnings ESP of +3.15% and carries a Zacks Rank #2.

AGCO Corp. (AGCO - Free Report) has an Earnings ESP of +4.40% and holds a Zacks Rank of 3.

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