Have you been paying attention to shares of
Packaging Corp. (? Shares have been on the move with the stock up 2.7% over the past month. The stock hit a new 52-week high of $159.97 in the previous session. Packaging Corp. has gained 17.2% since the start of the year compared to the -9.6% move for the Zacks Industrial Products sector and the 1.3% return for the Zacks Containers - Paper and Packaging industry. PKG Quick Quote PKG - Free Report) What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on January 26, 2022, Packaging Corp. reported EPS of $2.76 versus consensus estimate of $2.08 while it beat the consensus revenue estimate by 6.55%.
For the current fiscal year, Packaging Corp. is expected to post earnings of $10.77 per share on $8.38 billion in revenues. This represents a 14.8% change in EPS on an 8.38% change in revenues. For the next fiscal year, the company is expected to earn $11.36 per share on $8.51 billion in revenues. This represents a year-over-year change of 5.43% and 1.63%, respectively.
Packaging Corp. may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Packaging Corp. has a Value Score of B. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 14.8X current fiscal year EPS estimates, which is a premium to the peer industry average of 14X. On a trailing cash flow basis, the stock currently trades at 11.5X versus its peer group's average of 10.5X. Additionally, the stock has a PEG ratio of 2.96. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Packaging Corp. currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Packaging Corp. passes the test. Thus, it seems as though Packaging Corp. shares could still be poised for more gains ahead.
How Does PKG Stack Up to the Competition?
Shares of PKG have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is
Sonoco Products Company (. SON has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of B, and a Momentum Score of C. SON Quick Quote SON - Free Report)
Earnings were strong last quarter. Sonoco Products Company beat our consensus estimate by 1.12%, and for the current fiscal year, SON is expected to post earnings of $4.96 per share on revenue of $7.24 billion.
Shares of Sonoco Products Company have gained 9.8% over the past month, and currently trade at a forward P/E of 12.83X and a P/CF of 10.51X.
The Containers - Paper and Packaging industry may rank in the bottom 59% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for PKG and SON, even beyond their own solid fundamental situation.