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Packaging Corp (PKG) to Post Q2 Earnings: What's in the Cards?

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

Q1 Results

In the last reported quarter, Packaging Corporation’s earnings and revenues beat the respective Zacks Consensus Estimate. Both top- and bottom-line figures increased year over year.

Q2 Estimates

The Zacks Consensus Estimate for Packaging Corporation’s second-quarter earnings per share is currently pegged at $1.75, suggesting a decline of 26.8% from the prior-year quarter. The Zacks Consensus Estimate for total sales is pinned at $1.81 billion, indicating growth of 17.4% from the year-ago period. The Zacks Consensus Estimate for the company’s quarterly earnings moved north over the past 30 days.

The company has a trailing four-quarter average earnings surprise of 9.3%.

Factors At Play

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 in response to the coronavirus pandemic is expected to have aided the company’s Packaging segment’s April-June quarter performance. The Zacks Consensus Estimate for the segment’s quarterly revenues is pegged at $1,640 million for the second quarter, calling for a year-over-year rise of 16.3%. The consensus mark for the company’s operating income is pinned at $245 million, indicating year-over-year growth of 9.4%.

The e-commerce boom has been driving demand for the company’s packaging products. Additionally, the pandemic is fueling e-commerce growth as consumers’ demand for online grocery, beverage and pharmaceuticals delivery services has been shooting up, following travel restrictions imposed by governments worldwide. These factors are likely to have contributed to the company’s performance during the June-end quarter.

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 impacted unfavorably by dismal paper demand due to rising 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 $161 million for the June-end quarter, suggesting a year-over-year increase of 30.8%. The Zacks Consensus Estimate for the segment’s operating income is pinned at $17.9 million as against the prior-year quarter’s operating loss of $5.7 million.

Elevated freight and labor costs, higher operating and converting costs, coupled with rising annual maintenance outage costs at mills, might have dented the company’s margins during the second 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 -0.07%.

Zacks Rank: Packaging Corporation currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance

In a year’s time, shares of Packaging Corporation have gained 30.9% compared with the industry’s growth of 24.9%.

Zacks Investment Research
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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:

Pentair plc (PNR - Free Report) has an Earnings ESP of +0.28% and carries a Zacks Rank of 2, at present.

W.W. Grainger, Inc. (GWW - Free Report) , currently a Zacks #2 Ranked stock, has an Earnings ESP of +0.71%.

Crown Holdings, Inc. (CCK - Free Report) has an Earnings ESP of +3.57% and carries a Zacks Rank #3, currently.