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Packaging Corporation of America (PKG - Free Report) reported adjusted earnings per share of $2.13 in fourth-quarter 2023, beating the Zacks Consensus Estimate of $1.80. The bottom line decreased 9% year over year. However, it came above the company’s guidance of $1.76.
The decline was driven by lower prices and mix in both segments, and decreased volumes in the paper segment. These headwinds were somewhat offset by higher volume in the Packaging segment and lower costs.
Including one-time items, earnings in the reported quarter were $2.10 per share compared with the prior-year quarter’s earnings of $2.31 per share. Operational Update Sales in the fourth quarter declined 2% year over year to $1,938 million but beat the Zacks Consensus Estimate of $1,891 million. The cost of products sold was $1,528 million in the fourth quarter, flat year over year. The gross profit declined 8.9% year over year to $410 million.
Packaging Corporation of America Price, Consensus and EPS Surprise
Selling, general and administrative expenses amounted to $143 million, up from the prior year’s $146 million. The total segment operating income fell 9.2% year over year to $262 million.
Segmental Performance
Packaging: Sales in this segment decreased 1.8% year over year to $1.8 billion in the fourth quarter of 2023. We had anticipated a volume improvement of 1.3%, and an unfavorable price and mix impact of 5.9%. In the Packaging segment, total corrugated products shipments per day rose 6.9% year over year. We had anticipated a 2.1% improvement in daily shipments. Containerboard production was 1,213,000 tons for the quarter, higher than our expectation of 1,069,250 tons. Containerboard inventory was up 15,000 tons year over year and down 32,000 tons sequentially.
Adjusted operating profit was $265 million, a 6.8% drop from $284 million in the prior-year quarter.
Paper: The segment’s revenues were $144 million in the October-December quarter, down 6.3% year over year. The segment’s sales volume was down 4,000 tons from the fourth-quarter 2022 levels. Volumes were down 8,000 tons from the third quarter of 2023.
We had expected a pricing/mix impact of 3.6% in the fourth quarter. Volume was expected to be a negative 12.4%.
The Paper segment reported an adjusted operating profit of $31 million, a 10.8% fall from the year-ago quarter’s $34 million.
Cash Position
Packaging Corp had a cash balance of around $1,206 million at the end of 2023, up from $470 million of cash held at the end of 2022. PKG’s capital spending through the fourth quarter was $141 million, lower than $247 million in the fourth quarter of 2022.
2023 Performance
Packaging Corp reported adjusted earnings per share of $8.70 in 2023 compared with $11.14 reported in the prior year. Earnings beat the Zacks Consensus Estimate of $8.36. Including one-time items, the bottom line was $8.48, down 23% from the $11.03 reported in 2022.
Sales were down 8% year over year to $7.8 billion from the prior-year figure of $8.5 billion. The reported figure surpassed the Zacks Consensus Estimate of $7.76 billion.
Guidance
Packaging Corp projects first-quarter 2024 earnings of $1.54 per share.
In the Packaging segment, the company anticipates higher total corrugated product shipments from continued strong demand in the first quarter with two additional shipping days. Despite the reopening of the No. 2 machine at the Wallula Mill, containerboard volume is expected to be lower due to downtime caused by the conversion of the No. 3 machine at the company's Jackson Mill and a scheduled maintenance outage at its Counce, TN-based mill.
Pricing and mix are anticipated to be slightly higher following the implementation of PKG's stated January price hikes. However, this will be largely offset by a fall in reported benchmark pricing that took place late in 2023, with export prices remaining relatively unchanged.
In the Paper segment, the company expects an improved mix to move prices slightly higher. However, sales volumes are likely to be unchanged.
Price Performance
Packaging Corp’s shares have gained 23.3% in the past year compared with the industry’s growth of 1.5%.
Image Source: Zacks Investment Research
Zacks Rank and Other Stocks to Consider
Packaging Corp currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for AZZ’s fiscal 2024 earnings per share is pegged at $4.19. The consensus estimate for 2024 earnings has moved north by 2% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 37.6%. AZZ shares have rallied 46.4% in the past year.
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have been constant in the past 60 days. The company’s shares have gained 46.2% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2024 earnings is pegged at $4.03 per share. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days and suggests year-over-year growth of 6.8%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares have gained 37.8% in the past year.
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Packaging Corp (PKG) Q4 Earnings Beat Estimates, Dip Y/Y
Packaging Corporation of America (PKG - Free Report) reported adjusted earnings per share of $2.13 in fourth-quarter 2023, beating the Zacks Consensus Estimate of $1.80. The bottom line decreased 9% year over year. However, it came above the company’s guidance of $1.76.
The decline was driven by lower prices and mix in both segments, and decreased volumes in the paper segment. These headwinds were somewhat offset by higher volume in the Packaging segment and lower costs.
Including one-time items, earnings in the reported quarter were $2.10 per share compared with the prior-year quarter’s earnings of $2.31 per share.
Operational Update
Sales in the fourth quarter declined 2% year over year to $1,938 million but beat the Zacks Consensus Estimate of $1,891 million.
The cost of products sold was $1,528 million in the fourth quarter, flat year over year. The gross profit declined 8.9% year over year to $410 million.
Packaging Corporation of America Price, Consensus and EPS Surprise
Packaging Corporation of America price-consensus-eps-surprise-chart | Packaging Corporation of America Quote
Selling, general and administrative expenses amounted to $143 million, up from the prior year’s $146 million. The total segment operating income fell 9.2% year over year to $262 million.
Segmental Performance
Packaging: Sales in this segment decreased 1.8% year over year to $1.8 billion in the fourth quarter of 2023. We had anticipated a volume improvement of 1.3%, and an unfavorable price and mix impact of 5.9%. In the Packaging segment, total corrugated products shipments per day rose 6.9% year over year. We had anticipated a 2.1% improvement in daily shipments.
Containerboard production was 1,213,000 tons for the quarter, higher than our expectation of 1,069,250 tons. Containerboard inventory was up 15,000 tons year over year and down 32,000 tons sequentially.
Adjusted operating profit was $265 million, a 6.8% drop from $284 million in the prior-year quarter.
Paper: The segment’s revenues were $144 million in the October-December quarter, down 6.3% year over year. The segment’s sales volume was down 4,000 tons from the fourth-quarter 2022 levels. Volumes were down 8,000 tons from the third quarter of 2023.
We had expected a pricing/mix impact of 3.6% in the fourth quarter. Volume was expected to be a negative 12.4%.
The Paper segment reported an adjusted operating profit of $31 million, a 10.8% fall from the year-ago quarter’s $34 million.
Cash Position
Packaging Corp had a cash balance of around $1,206 million at the end of 2023, up from $470 million of cash held at the end of 2022. PKG’s capital spending through the fourth quarter was $141 million, lower than $247 million in the fourth quarter of 2022.
2023 Performance
Packaging Corp reported adjusted earnings per share of $8.70 in 2023 compared with $11.14 reported in the prior year. Earnings beat the Zacks Consensus Estimate of $8.36. Including one-time items, the bottom line was $8.48, down 23% from the $11.03 reported in 2022.
Sales were down 8% year over year to $7.8 billion from the prior-year figure of $8.5 billion. The reported figure surpassed the Zacks Consensus Estimate of $7.76 billion.
Guidance
Packaging Corp projects first-quarter 2024 earnings of $1.54 per share.
In the Packaging segment, the company anticipates higher total corrugated product shipments from continued strong demand in the first quarter with two additional shipping days. Despite the reopening of the No. 2 machine at the Wallula Mill, containerboard volume is expected to be lower due to downtime caused by the conversion of the No. 3 machine at the company's Jackson Mill and a scheduled maintenance outage at its Counce, TN-based mill.
Pricing and mix are anticipated to be slightly higher following the implementation of PKG's stated January price hikes. However, this will be largely offset by a fall in reported benchmark pricing that took place late in 2023, with export prices remaining relatively unchanged.
In the Paper segment, the company expects an improved mix to move prices slightly higher. However, sales volumes are likely to be unchanged.
Price Performance
Packaging Corp’s shares have gained 23.3% in the past year compared with the industry’s growth of 1.5%.
Image Source: Zacks Investment Research
Zacks Rank and Other Stocks to Consider
Packaging Corp currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the Industrial Products sector are AZZ Inc. (AZZ - Free Report) , Applied Industrial Technologies (AIT - Free Report) and A. O. Smith Corporation (AOS - Free Report) . AZZ currently sports a Zacks Rank #1 (Strong Buy), and AIT and AOS carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AZZ’s fiscal 2024 earnings per share is pegged at $4.19. The consensus estimate for 2024 earnings has moved north by 2% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 37.6%. AZZ shares have rallied 46.4% in the past year.
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have been constant in the past 60 days. The company’s shares have gained 46.2% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2024 earnings is pegged at $4.03 per share. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days and suggests year-over-year growth of 6.8%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares have gained 37.8% in the past year.