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Packaging Corporation (PKG) Poised for Healthy Growth
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On Aug 26, Zacks Investment Research updated the research report on packaging products manufacturer Packaging Corporation of America (PKG - Free Report) .
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 demands of its diverse clientele.
The company’s corrugated product manufacturing plants produce a wide variety of packaging products, including 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 and ensures a steady revenue stream.
Last month, Packaging Corporation entered into a definitive agreement to acquire all the assets of TimBar Corporation, a large independent corrugated products producer, for $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.
Despite stiff competition from other alternative product categories, industry-wide corrugated product shipments increased 2.2% year over year during the second quarter of 2016. The company expects seasonally higher volumes for containerboard and corrugated products and lower energy costs in the third quarter of 2016. Being one of the leading producers of containerboard and corrugated products in the country, Packaging Corporation is likely to benefit from the modest growth dynamics of the industry. 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.
Packaging Corporation currently carries a Zacks Rank #2 (Buy). 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) Poised for Healthy Growth
On Aug 26, Zacks Investment Research updated the research report on packaging products manufacturer Packaging Corporation of America (PKG - Free Report) .
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 demands of its diverse clientele.
The company’s corrugated product manufacturing plants produce a wide variety of packaging products, including 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 and ensures a steady revenue stream.
Last month, Packaging Corporation entered into a definitive agreement to acquire all the assets of TimBar Corporation, a large independent corrugated products producer, for $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.
Despite stiff competition from other alternative product categories, industry-wide corrugated product shipments increased 2.2% year over year during the second quarter of 2016. The company expects seasonally higher volumes for containerboard and corrugated products and lower energy costs in the third quarter of 2016. Being one of the leading producers of containerboard and corrugated products in the country, Packaging Corporation is likely to benefit from the modest growth dynamics of the industry. 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.
Packaging Corporation currently carries a Zacks Rank #2 (Buy). 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 >>