A month has gone by since the last earnings report for Packaging Corp. (PKG Quick QuotePKG - Free Report) . Shares have added about 3.1% 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 drivers.

Packaging Corp Q1 Earnings & Sales Top Estimates, Up Y/Y

Packaging Corporation reported adjusted earnings per share of $1.77 in first-quarter 2021, beating the Zacks Consensus Estimate of $1.47. The reported figure also increased 18% year over year. This upside was driven by higher volume, price and mix in packaging segment and lower annual outage costs. These were, however, partly offset by dismal volume and price and mix in the Paper segment, coupled with higher operating as well as higher freight and logistics expenses.

Including one-time items, earnings in the reported quarter came in at $1.75 per share compared with the prior-year quarter’s $1.49 per share.

Operational Update

Sales in the first quarter climbed 5.7% year over year to $1,807 million. The reported figure also surpassed the Zacks Consensus Estimate of $1,738 million.

Cost of products sold was up 4.5% year over year to $1,404 million in the first quarter. Gross profit increased 10.7% year over year to $404 million. Selling, general and administrative expenses came in at $145 million compared with $146 million in the prior-year quarter. Adjusted total segment operating income grew 15.2% year over year to $242 million.

Segmental Performance

Packaging: Sales in the segment increased to $1,624 million from the $1,468 million recorded in the year-earlier period. Segmental income, excluding special items, came in at $260 million in the quarter compared with the $201 million witnessed in the prior-year quarter.

Printing Papers: This segment’s revenues fell 24% year over year to $165 million in the January–March quarter. The segment reported adjusted operating profit of $9.8 million compared with the year-ago quarter’s $32.6 million.

Cash Position

The company had a cash balance of $1,133 million at the end of first-quarter 2021, up from the $913 million witnessed in the comparable period last year.

Outlook

Packaging Corporation expects the demand in its packaging segment to be strong in the second quarter. The company will continue to implement its proposed price-rise actions across the segment in response to cost inflation. It also sees an increase in the average export prices during the current quarter. Packaging Corporation anticipates flat volumes with higher average price and mix in its paper segment this quarter.

Management projects higher planned outage expenses in the June-end quarter compared with the March-end quarter level. Also, it expects escalating freight, logistics, operating and converting costs. However, energy costs are likely to improve owing to a seasonally milder weather.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Packaging Corp. has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Packaging Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.