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Packaging Corporation (PKG) Hurt by Inflationary Pressures

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We issued an updated research report on Packaging Corporation of America (PKG - Free Report) on Sep 26. The company has been plagued with headwinds like higher recycled fiber prices and incremental wage pressure.

Notably, Packaging Corporation’s performance in 2018 will be negatively impacted by the prevalent inflation. Majority of operating costs, including higher recycled fiber prices and incremental wage pressure with a tighter labor market, will hurt margins. Also, increased freight and logistics expenses, and higher scheduled maintenance outage costs will dampen margins.

The company expects that planned annual maintenance outage costs will be higher by 2 cents per share in third-quarter 2018. Thus, the full-year outage costs will now be 1 cent higher, totaling 61 cents per share.

Packaging Corporation’s shares have underperformed the industry with respect to price performance over the past year. The company's shares have lost around 3%, while the industry recorded growth of around 2%.


 

Moreover, this Zacks Rank #4 (Sell) stock has witnessed downward estimate revisions over the last 60 days. The Zacks Consensus Estimate for 2018 has edged down roughly 0.6% to $7.90.

Stocks to Consider

Some better-ranked stocks in the sector include Atkore International Group Inc. (ATKR - Free Report) , Caterpillar Inc. (CAT - Free Report) and Lawson Products, Inc. . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atkore has an expected long-term growth rate of 10%. Its shares have gained 33% over the past year.

Caterpillar has an estimated long-term growth rate of 15.6%. Its shares have been up 23% in a year’s time.

Lawson Products has a projected long-term growth rate of 17.5%. Its shares have rallied 29% over the past year.

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Caterpillar Inc. (CAT) - free report >>

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Atkore Inc. (ATKR) - free report >>

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