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Packaging Corporation (PKG) Scales a New 52-Week High
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Shares of packaging products manufacturer Packaging Corporation of America (PKG - Free Report) scaled a new 52-week high of $77.40 on Aug 11, before closing the trading session a notch lower at $76.96 for a healthy year-to-date return of 22.1%. Barring minor hiccups, Waste Connections’ share prices have steadily been on an uptrend since July this year.
Despite its strong price appreciation, this Zacks Rank #2 (Buy) stock has the wherewithal to continue its growth curve. The stock is currently trading at a forward P/E of 16.0x and has long-term earnings growth expectation of 11.5%.
Growth Drivers
Packaging Corporation is the fourth largest containerboard and corrugated products producer in the U.S. Its products include a diversified range of corrugated products such as shipping containers, point-of-sale graphics packaging, point-of-purchase displays and other specialized packaging. An enormous scale of production and an extended product portfolio offer a competitive advantage to the company to fulfill the varied demands of its diverse clientele.
The company’s corrugated product manufacturing plants produce a wide variety of packaging products, which include conventional shipping containers used to protect and transport manufactured goods, multi-colored boxes, and displays with strong visual appeal that aid merchandise the packaged product across retail locations. In addition, Packaging Corporation is a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. The diverse product portfolio mitigates operating risks associated with any downturn in a particular product category.
Last month, Packaging Corporation entered into a definitive agreement to acquire all of the assets of TimBar Corporation, a large independent corrugated products producer, in a cash-free, debt-free transaction worth $386 million in cash. This strategic acquisition shows that the company is focused on increasing its vertical integration of containerboard to above 90%.The company expects this acquisition to increase its containerboard integration by over 200,000 tons or 6% from its current level of 87%. The transaction will also allow for further optimization and enhancement of its mill capacity. The acquisition, expected to close in the third quarter, is likely to be accretive with immediate effect.
Management further expects to increase shipment of containerboard and corrugated products. Paper prices are expected to move higher reflecting continued realization of the announced price increases, while annual outage costs are expected to be lower. The company also expects a lower mix of corrugated products and higher prices for recycled fiber, electricity and fuels.
All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.
Other Stocks to Consider
Some other favorably-ranked stocks in the industry include Fibria Celulose S.A. , Neenah Paper, Inc. and Sappi Limited (SPPJY - Free Report) , each carrying the same Zacks Rank as Packaging Corporation.
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Packaging Corporation (PKG) Scales a New 52-Week High
Shares of packaging products manufacturer Packaging Corporation of America (PKG - Free Report) scaled a new 52-week high of $77.40 on Aug 11, before closing the trading session a notch lower at $76.96 for a healthy year-to-date return of 22.1%. Barring minor hiccups, Waste Connections’ share prices have steadily been on an uptrend since July this year.
Despite its strong price appreciation, this Zacks Rank #2 (Buy) stock has the wherewithal to continue its growth curve. The stock is currently trading at a forward P/E of 16.0x and has long-term earnings growth expectation of 11.5%.
Growth Drivers
Packaging Corporation is the fourth largest containerboard and corrugated products producer in the U.S. Its products include a diversified range of corrugated products such as shipping containers, point-of-sale graphics packaging, point-of-purchase displays and other specialized packaging. An enormous scale of production and an extended product portfolio offer a competitive advantage to the company to fulfill the varied demands of its diverse clientele.
The company’s corrugated product manufacturing plants produce a wide variety of packaging products, which include conventional shipping containers used to protect and transport manufactured goods, multi-colored boxes, and displays with strong visual appeal that aid merchandise the packaged product across retail locations. In addition, Packaging Corporation is a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. The diverse product portfolio mitigates operating risks associated with any downturn in a particular product category.
PACKAGING CORP Price and Consensus
PACKAGING CORP Price and Consensus | PACKAGING CORP Quote
Last month, Packaging Corporation entered into a definitive agreement to acquire all of the assets of TimBar Corporation, a large independent corrugated products producer, in a cash-free, debt-free transaction worth $386 million in cash. This strategic acquisition shows that the company is focused on increasing its vertical integration of containerboard to above 90%.The company expects this acquisition to increase its containerboard integration by over 200,000 tons or 6% from its current level of 87%. The transaction will also allow for further optimization and enhancement of its mill capacity. The acquisition, expected to close in the third quarter, is likely to be accretive with immediate effect.
Management further expects to increase shipment of containerboard and corrugated products. Paper prices are expected to move higher reflecting continued realization of the announced price increases, while annual outage costs are expected to be lower. The company also expects a lower mix of corrugated products and higher prices for recycled fiber, electricity and fuels.
All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.
Other Stocks to Consider
Some other favorably-ranked stocks in the industry include Fibria Celulose S.A. , Neenah Paper, Inc. and Sappi Limited (SPPJY - Free Report) , each carrying the same Zacks Rank as Packaging Corporation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>