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Packaging Corp (PKG) Q1 Earnings Beat, Sales Miss Estimates

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Packaging Corporation of America (PKG - Free Report) delivered adjusted earnings per share of $1.98 in first-quarter 2019, surpassing the Zacks Consensus Estimate of $1.96. The reported figure also climbed 27.7% year over year. Earnings came in above management’s guidance of $1.97 per share. Results benefitted from higher prices and mix in both the Packaging and Paper segments, as well as lower annual outage expenses. However, lower volume in the Paper segment as well as higher material costs, fixed expenses and indirect and converting costs negated some of the gains.

Including one-time items, earnings came in at $1.97 per share compared with $1.48 earned in the year-ago quarter.

Operational Update

Sales for the first quarter were $1.73 billion, up 2.5% from $1.69 billion generated in the year-earlier quarter. The reported figure, however, lagged the Zacks Consensus Estimate of $1.75 billion.

Cost of products sold declined 1.7% year over year to $1,312.3 million in the first quarter. Gross profit increased around 18.3% to $421 million from $356 million witnessed in the prior-year quarter. Selling, general and administrative expenses flared up 3.7% to $140 million from $135 million incurred in the year-ago quarter.

Packaging Corporation of America Price, Consensus and EPS Surprise

Segmental Performance

Packaging: Sales in this segment went up to $1,477.6 million, reflecting year-over-year rise of 5.3%. Segmental income, excluding special items, came in at $250 million in the March-end quarter compared with $225 million witnessed in the comparable period last year.

Printing Papers: This segment’s revenues slipped 11% year over year to $239.7 million in the quarter due to discontinuation of the paper business in the Wallula Mill. Segmental income, excluding special items, increased to approximately $46 million from the January-March quarter from $16 million in the year-earlier period.

Cash Position

At the end of the first quarter, the company had a cash balance of $442.4 million compared with $102.4 million recorded at the end of the prior-year quarter.

Packaging Corporation projects earnings per share of around $2.05 for second-quarter 2019, up from the prior view of $1.97. It anticipates higher product shipments with lower prices in the Packaging segment. The Paper Segment is expected to incur higher outage costs due to the annual shutdown in the International Falls mill. Nonetheless, the company expects higher freight, repairs and fixed costs, as well as higher share-based compensation costs across its segments in the second quarter. Packaging Corporation expects improved energy costs due to a seasonally milder weather.

Share Price Performance

Over the past year, Packaging Corporation’s stock has depreciated around 14.2%, compared to the 3.4% growth witnessed by the industry.

Zacks Rank and Stocks to Consider

Packaging Corporation currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Industrial Products sector are DMC Global Inc. (BOOM - Free Report) , Lawson Products, Inc. (LAWS - Free Report) and DXP Enterprises, Inc. (DXPE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DMC Global has an estimated earnings growth rate of 77.3% for the ongoing year. The company’s shares have soared 65.5%, in the past year.

Lawson Products has an impressive expected earnings growth rate of 102.5% for the current year. The stock has appreciated 40.3% in a year’s time.

DXP Enterprises has a projected earnings growth rate of 21.6% for 2019. The company’s shares have gained 20.2%, over the past year.

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