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Business Wire
6 days ago
- Business
- Business Wire
Packaging Corporation of America Reports Second Quarter 2025 Results
LAKE FOREST, Ill.--(BUSINESS WIRE)--Packaging Corporation of America (NYSE: PKG) today reported second quarter 2025 net income of $242 million, or $2.67 per share, and net income of $224 million, or $2.48 per share, excluding special items. Second quarter net sales were $2.2 billion in 2025 and $2.1 billion in 2024. (1) For descriptions and amounts of our special items, see the schedules with this release. (2) Diluted EPS excluding Special Items is a non-GAAP financial measure. For information regarding our use of non-GAAP financial measures and descriptions and amounts of our special items, see the schedules with this release. (3) Amounts may not foot due to rounding. Expand Reported earnings in the second quarter of 2025 include special items primarily for gains from the sale of real estate in connection with the disposal of corrugated products facilities that were previously closed, partially offset by costs related to the pending Greif containerboard business acquisition. Excluding special items, the $.28 per share increase in second quarter 2025 earnings compared to the second quarter of 2024 was driven primarily by higher prices and mix in the Packaging segment $.98, lower fiber costs $.13, higher prices and mix in the Paper segment $.04 and lower tax rate $.02. These items were partially offset by higher operating costs ($.30), higher maintenance outage expense ($.21), lower production and export sales volume in the Packaging Segment ($.13), higher depreciation expense ($.10), higher fixed and other expense ($.09), lower volume in the Paper segment ($.02), higher freight expense ($.02) and higher interest expense ($.02). Results were $.07 above second quarter guidance of $2.41 per share primarily due to lower operating costs and fiber costs. Financial information by segment is summarized below and in the schedules with this release. (1) Segment operating income (loss) excluding special items and EBITDA excluding special items are non-GAAP financial measures. We provide information regarding our use of non-GAAP financial measures and reconciliations of historical non-GAAP financial measures presented in this press release to the most comparable measure reported in accordance with GAAP in the schedules to this press release. Expand In the Packaging segment, total corrugated products shipments were up 1.7% per day and flat overall compared to the second quarter of 2024, with one additional workday in 2024. Containerboard production was 1,195,000 tons, and containerboard inventory was up 38,000 tons from the end of the second quarter of 2024 and down 17,000 tons compared to the end of the first quarter of 2025. In the Paper segment, sales volume was down 5% from the second quarter of 2024 and 7% compared to the first quarter of 2025. Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, 'We operated very well during the quarter, delivering strong earnings and cash flows as well as higher margins in the Packaging segment. Pricing in the Packaging segment was consistent with expectations as we fully realized our earlier announced price increases. Despite cautious ordering patterns from customers, corrugated products volume was solid and steady throughout the quarter, with per day shipments exceeding the second quarter of 2024 and the first quarter of 2025. As expected, export containerboard sales were lower. We ran our containerboard mills to meet demand and drew down inventory to end at targeted levels. The Paper segment delivered another profitable quarter with strong margin performance, as we realized our earlier price increases. We continued to successfully manage costs across all of our operations, executing our capital projects and efficiency initiatives, which have helped offset inflation.' 'Looking ahead as we move from the second and into the third quarter,' Mr. Kowlzan added, 'while our corrugated products customers have remained cautious into July as economic uncertainty persists, we expect higher corrugated shipments, which will drive increased containerboard production. Export containerboard sales will be lower due to the effects of the global trade environment. We will build some containerboard inventory ahead of our fourth quarter maintenance outage at the DeRidder mill. We expect prices and mix in the Packaging segment to be relatively flat. We also expect flat pricing in the Paper segment and expect production and sales to increase with the International Falls mill outage completed in the second quarter and seasonal back-to-school orders. We have no scheduled maintenance outages during the third quarter and expect maintenance outage expense to be lower. Freight costs will be higher with the full effect of rail rate increases at our mills. Operating costs will be near second quarter levels and fiber costs will be slightly lower. Considering these items, we expect third quarter earnings of $2.80 per share, excluding special items. Our guidance does not include any possible impact from the pending acquisition of the Greif containerboard business, which is subject to satisfaction of certain conditions, including regulatory approval.' We present our earnings expectation for the upcoming quarter excluding special items as special items are difficult to predict and quantify and may reflect the effect of future events. We expect to incur acquisition and integration related costs for our pending acquisition of the Greif containerboard business during the third quarter; however, additional special items may arise due to third quarter events. PCA is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. PCA operates eight mills and 85 corrugated products plants and related facilities. Some of the statements in this press release are forward-looking statements. Forward-looking statements include statements about our future earnings and financial condition, expected benefits from acquisitions and restructuring activities, our industry and our business strategy. Statements that contain words such as 'will', 'should', 'anticipate', 'believe', 'expect', 'intend', 'estimate', 'hope' or similar expressions, are forward-looking statements. These forward-looking statements are based on the current expectations of PCA. Because forward-looking statements involve inherent risks and uncertainties, the plans, actions and actual results of PCA could differ materially. The factors that could cause plans, actions and results to differ materially from PCA's current expectations include the following: the impact of general economic conditions; conditions in the paper and packaging industries, including competition, product demand and product pricing; fluctuations in wood fiber and recycled fiber costs; fluctuations in purchased energy costs; the possibility of unplanned outages or interruptions at our principal facilities; and legislative or regulatory requirements, particularly concerning environmental matters, as well as those identified under Item 1A. Risk Factors in PCA's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission and available at the SEC's website at ' '. Packaging Corporation of America Consolidated Earnings Results Unaudited (dollars in millions, except per-share data) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Net sales $ 2,171.3 $ 2,075.3 $ 4,312.3 $ 4,054.8 Cost of sales (1,688.3 ) (1) (1,637.6 ) (3,374.5 ) (1) (3,246.7 ) (2) Gross profit 483.0 437.7 937.8 808.1 Selling, general, and administrative expenses (153.2 ) (149.5 ) (314.6 ) (301.3 ) Other income (expense), net 3.9 (1) (12.2 ) (2) (9.2 ) (1) (34.8 ) (2) Income from operations 333.7 276.0 614.0 472.0 Non-operating pension income - 1.1 - 2.2 Interest expense, net (13.1 ) (10.4 ) (26.0 ) (19.9 ) Income before taxes 320.6 266.7 588.0 454.3 Provision for income taxes (79.1 ) (67.8 ) (142.7 ) (108.4 ) Net income $ 241.5 $ 198.9 $ 445.3 $ 345.9 Earnings per share: Basic $ 2.68 $ 2.22 $ 4.95 $ 3.86 Diluted $ 2.67 $ 2.21 $ 4.93 $ 3.84 Computation of diluted earnings per share under the two class method: Net income $ 241.5 $ 198.9 $ 445.3 $ 345.9 Less: Distributed and undistributed income available to participating securities (1.6 ) (1.4 ) (3.0 ) (2.5 ) Net income attributable to PCA shareholders $ 239.9 $ 197.5 $ 442.3 $ 343.4 Diluted weighted average shares outstanding 89.7 89.5 89.7 89.5 Diluted earnings per share $ 2.67 $ 2.21 $ 4.93 $ 3.84 Supplemental financial information: Capital spending $ 169.7 $ 245.0 $ 317.8 $ 321.7 Cash, cash equivalents, and marketable debt securities $ 955.9 $ 1,172.8 $ 955.9 $ 1,172.8 Expand (1) The three and six months ended June 30, 2025 include the following: a. $24.6 million and $18.8 million, respectively, of income related to gains on sales of corrugated products facilities, partially offset by closure costs related to corrugated products facilities. These items were recorded in 'Cost of sales' and 'Other expense, net', as appropriate. b. $1.6 million of charges related to the announced Greif, Inc. acquisition, which were recorded in 'Other expense, net.' (2) The three and six months ended June 30, 2024 include the following: a. $0.6 million of income and $9.7 million of charges, respectively, related to the announced discontinuation of production of uncoated freesheet paper grades on the No. 3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities. The costs were recorded in 'Cost of sales' and 'Other expense, net', as appropriate. b. $0.1 million of charges consisting of closure costs related to corrugated products facilities. For the six months ended June 30, 2024, these charges were completely offset by $0.1 million of income primarily related to a favorable lease buyout for a closed corrugated products facility during the first quarter of 2024. These items were recorded in "Cost of sales" and "Other expense, net", as appropriate. Expand Packaging Corporation of America Segment Information Unaudited (dollars in millions) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Segment sales Packaging $ 2,005.9 $ 1,908.3 $ 3,976.3 $ 3,706.5 Paper 145.8 150.1 300.0 313.9 Corporate and Other 19.6 16.9 36.0 34.4 $ 2,171.3 $ 2,075.3 $ 4,312.3 $ 4,054.8 Segment operating income (loss) Packaging $ 346.3 $ 279.8 $ 624.4 $ 483.6 Paper 25.8 26.7 61.4 56.4 Corporate and Other (38.4 ) (30.5 ) (71.8 ) (68.0 ) Income from operations 333.7 276.0 614.0 472.0 Non-operating pension income - 1.1 - 2.2 Interest expense, net (13.1 ) (10.4 ) (26.0 ) (19.9 ) Income before taxes $ 320.6 $ 266.7 $ 588.0 $ 454.3 Segment operating income (loss) excluding special items (1) Packaging $ 321.7 $ 279.9 $ 605.6 $ 487.5 Paper 25.8 26.1 61.4 62.2 Corporate and Other (36.8 ) (30.5 ) (70.2 ) (68.0 ) $ 310.7 $ 275.5 $ 596.8 $ 481.7 EBITDA excluding special items (1) Packaging $ 452.9 $ 400.0 $ 862.1 $ 726.2 Paper 30.3 30.6 70.5 71.2 Corporate and Other (32.4 ) (26.6 ) (60.8 ) (60.2 ) $ 450.8 $ 404.0 $ 871.8 $ 737.2 Expand (1) Income (loss) from operations excluding special items, segment operating income (loss) excluding special items, earnings before non-operating pension income, interest, income taxes, and depreciation, amortization, and depletion (EBITDA), segment EBITDA, EBITDA excluding special items, and segment EBITDA excluding special items are non-GAAP financial measures. Management excludes special items as it believes these items are not necessarily reflective of the ongoing results of operations of our business. We present these measures because they provide a means to evaluate the performance of our segments and our company on an ongoing basis using the same measures that are used by our management, because these measures assist in providing a meaningful comparison between periods presented and because these measures are frequently used by investors and other interested parties in the evaluation of companies and the performance of their segments. The tables included in "Reconciliation of Non-GAAP Financial Measures" on the following pages reconcile the non-GAAP measures with the most directly comparable GAAP measures. Any analysis of non-GAAP financial measures should be done only in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. Expand (1) See footnote (1) on page 2, for a discussion of non-GAAP financial measures. Expand Packaging Corporation of America Reconciliation of Non-GAAP Financial Measures Unaudited (dollars in millions) Net Income Excluding Special Items and EPS Excluding Special Items (1) Three Months Ended June 30, 2025 2024 Income before taxes Income Taxes Net Income Diluted EPS Income before taxes Income Taxes Net Income Diluted EPS As reported in accordance with GAAP $ 320.6 $ (79.1 ) $ 241.5 $ 2.67 $ 266.7 $ (67.8 ) $ 198.9 $ 2.21 Special items (2): Facilities closure and other (income) costs (24.6 ) 6.1 (18.5 ) (0.20 ) 0.1 - 0.1 - Acquisition and integration-related costs 1.6 (0.4 ) 1.2 0.01 - - - - Jackson mill conversion-related activities - - - - (0.6 ) 0.2 (0.4 ) - Total special items (23.0 ) 5.7 (17.3 ) (0.19 ) (0.5 ) 0.2 (0.3 ) - Excluding special items $ 297.6 $ (73.4 ) $ 224.2 $ 2.48 $ 266.2 $ (67.6 ) $ 198.6 $ 2.20 (3) Six Months Ended June 30, 2025 2024 Income before taxes Income Taxes Net Income Diluted EPS Income before taxes Income Taxes Net Income Diluted EPS As reported in accordance with GAAP $ 588.0 $ (142.7 ) $ 445.3 $ 4.93 $ 454.3 $ (108.4 ) $ 345.9 $ 3.84 Special items (2): Facilities closure and other income (18.8 ) 4.7 (14.1 ) (0.15 ) - - - - Acquisition and integration-related costs 1.6 (0.4 ) 1.2 0.01 - - - - Jackson mill conversion-related activities - - - - 9.7 (2.4 ) 7.3 0.08 Total special items (17.2 ) 4.3 (12.9 ) (0.14 ) 9.7 (2.4 ) 7.3 0.08 Excluding special items $ 570.8 $ (138.4 ) $ 432.4 $ 4.79 $ 464.0 $ (110.8 ) $ 353.2 $ 3.92 Expand (1) Net income excluding special items and earnings per share excluding special items are non-GAAP financial measures. Management excludes special items as it believes these items are not necessarily reflective of the ongoing results of operations of our business. We present these measures because they provide a means to evaluate the performance of our company on an ongoing basis using the same measures that are used by our management, because these measures assist in providing a meaningful comparison between periods presented and because these measures are frequently used by investors and other interested parties in the evaluation of companies and their performance. Any analysis of non-GAAP financial measures should be done only in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. (2) Pre-tax special items are tax-effected at a combined federal and state income tax rate in effect for the period the special items were recorded and this rate is adjusted for each subsequent quarter to be consistent with the estimated annual effective tax rate, in accordance with ASC 270, Interim Reporting, and ASC 740-270, Income Taxes – Intra Period Tax Allocation. For all periods presented, income taxes on pre-tax special items represent the current amount of tax. For more information related to these items, see the footnotes to the Consolidated Earnings Results on page 1. (3) Amount may not foot due to rounding. Expand Packaging Corporation of America Reconciliation of Non-GAAP Financial Measures Unaudited (dollars in millions) EBITDA and EBITDA Excluding Special Items (1) EBITDA represents income before non-operating pension income, interest, income taxes, and depreciation, amortization, and depletion. The following table reconciles net income to EBITDA and EBITDA excluding special items: Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Net income $ 241.5 $ 198.9 $ 445.3 $ 345.9 Non-operating pension income - (1.1 ) - (2.2 ) Interest expense, net 13.1 10.4 26.0 19.9 Provision for income taxes 79.1 67.8 142.7 108.4 Depreciation, amortization, and depletion 140.7 128.5 278.6 256.9 EBITDA (1) $ 474.4 $ 404.5 $ 892.6 $ 728.9 Special items: Facilities closure and other (income) costs (25.2 ) 0.1 (22.4 ) - Acquisition and integration-related costs 1.6 - 1.6 - Jackson mill conversion-related activities - (0.6 ) - 8.3 EBITDA excluding special items (1) $ 450.8 $ 404.0 $ 871.8 $ 737.2 Expand (1) See footnote (1) on page 2, for a discussion of non-GAAP financial measures. Expand Packaging Corporation of America Reconciliation of Non-GAAP Financial Measures Unaudited (dollars in millions) The following table reconciles segment operating income (loss) to segment EBITDA and segment EBITDA excluding special items: Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Packaging Segment operating income $ 346.3 $ 279.8 $ 624.4 $ 483.6 Depreciation, amortization, and depletion 131.8 120.1 260.1 238.6 EBITDA (1) 478.1 399.9 884.5 722.2 Facilities closure and other (income) costs (25.2 ) 0.1 (22.4 ) - Jackson mill conversion-related activities - - - 4.0 EBITDA excluding special items (1) $ 452.9 $ 400.0 $ 862.1 $ 726.2 Paper Segment operating income $ 25.8 $ 26.7 $ 61.4 $ 56.4 Depreciation, amortization, and depletion 4.5 4.5 9.1 10.5 EBITDA (1) 30.3 31.2 70.5 66.9 Jackson mill conversion-related activities - (0.6 ) - 4.3 EBITDA excluding special items (1) $ 30.3 $ 30.6 $ 70.5 $ 71.2 Corporate and Other Segment operating loss $ (38.4 ) $ (30.5 ) $ (71.8 ) $ (68.0 ) Depreciation, amortization, and depletion 4.4 3.9 9.4 7.8 EBITDA (1) (34.0 ) (26.6 ) (62.4 ) (60.2 ) Acquisition and integration-related costs 1.6 - 1.6 - EBITDA excluding special items (1) $ (32.4 ) $ (26.6 ) $ (60.8 ) $ (60.2 ) EBITDA excluding special items (1) $ 450.8 $ 404.0 $ 871.8 $ 737.2 Expand (1) See footnote (1) on page 2, for a discussion of non-GAAP financial measures. Expand
Yahoo
08-05-2025
- Business
- Yahoo
Q1 Earnings Highs And Lows: Packaging Corporation of America (NYSE:PKG) Vs The Rest Of The Industrial Packaging Stocks
As the craze of earnings season draws to a close, here's a look back at some of the most exciting (and some less so) results from Q1. Today, we are looking at industrial packaging stocks, starting with Packaging Corporation of America (NYSE:PKG). Industrial packaging companies have built competitive advantages from economies of scale that lead to advantaged purchasing and capital investments that are difficult and expensive to replicate. Recently, eco-friendly packaging and conservation are driving customers preferences and innovation. For example, plastic is not as desirable a material as it once was. Despite being integral to consumer goods ranging from beer to toothpaste to laundry detergent, these companies are still at the whim of the macro, especially consumer health and consumer willingness to spend. The 8 industrial packaging stocks we track reported a satisfactory Q1. As a group, revenues beat analysts' consensus estimates by 0.9%. While some industrial packaging stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.2% since the latest earnings results. Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection. Packaging Corporation of America reported revenues of $2.14 billion, up 8.2% year on year. This print exceeded analysts' expectations by 1.5%. Overall, it was a strong quarter for the company with a solid beat of analysts' sales volume estimates and a decent beat of analysts' adjusted operating income estimates. Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, 'A new first quarter revenue record was achieved to begin the new year. In the Packaging segment we had excellent implementation of our previously announced price increases and, although we began to see some pullback in the middle of the quarter related to the uncertainty created by global trade tensions, box demand was solid and exceeded a very strong comparative period in last year's first quarter. Outstanding operational performance and scheduled outage execution at our mills delivered record first quarter containerboard production to meet this demand, and we ended the quarter at targeted inventory levels. Our Paper segment continued to achieve impressive margins with both volume and prices slightly above original estimates. Across the Company, continued emphasis on operational efficiency, cost reduction initiatives, and capital project execution helped minimize the persistent inflation we see throughout most of our cost structure.' Unsurprisingly, the stock is down 3.4% since reporting and currently trades at $180. Is now the time to buy Packaging Corporation of America? Access our full analysis of the earnings results here, it's free. Formerly Crown Cork & Seal, Crown Holdings (NYSE:CCK) produces packaging products for consumer marketing companies, including food, beverage, household, and industrial products. Crown Holdings reported revenues of $2.89 billion, up 3.7% year on year, outperforming analysts' expectations by 1.5%. The business had a very strong quarter with an impressive beat of analysts' EPS estimates and a solid beat of analysts' EBITDA estimates. The market seems happy with the results as the stock is up 8.2% since reporting. It currently trades at $97.10. Is now the time to buy Crown Holdings? Access our full analysis of the earnings results here, it's free. Founded in 1991, Graphic Packaging (NYSE:GPK) is a provider of paper-based packaging solutions for a wide range of products. Graphic Packaging Holding reported revenues of $2.12 billion, down 6.2% year on year, in line with analysts' expectations. It was a softer quarter as it posted full-year revenue guidance missing analysts' expectations and full-year EBITDA guidance missing analysts' expectations significantly. Graphic Packaging Holding delivered the slowest revenue growth and weakest full-year guidance update in the group. As expected, the stock is down 13.6% since the results and currently trades at $21.85. Read our full analysis of Graphic Packaging Holding's results here. Established in 1898, International Paper (NYSE:IP) produces containerboard, pulp, paper, and materials used in packaging and printing applications. International Paper reported revenues of $5.90 billion, up 27.8% year on year. This result lagged analysts' expectations by 1.5%. It was a softer quarter as it also logged a miss of analysts' Cellulose Fibers revenue estimates and a significant miss of analysts' adjusted operating income estimates. International Paper scored the fastest revenue growth but had the weakest performance against analyst estimates among its peers. The stock is down 7.8% since reporting and currently trades at $43.88. Read our full, actionable report on International Paper here, it's free. Started with a $200 loan in 1880, Ball (NYSE:BLL) manufactures aluminum packaging for beverages, personal care, and household products as well as aerospace systems and other technologies. Ball reported revenues of $3.10 billion, up 7.8% year on year. This print beat analysts' expectations by 6.7%. It was a stunning quarter as it also put up a solid beat of analysts' organic revenue and adjusted operating income estimates. Ball achieved the biggest analyst estimates beat among its peers. The stock is down 2.3% since reporting and currently trades at $50.66. Read our full, actionable report on Ball here, it's free. As a result of the Fed's rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed's 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump's victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025. Want to invest in winners with rock-solid fundamentals? Check out our Strong Momentum Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate. Join Paid Stock Investor Research Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here.
Yahoo
23-04-2025
- Business
- Yahoo
Packaging Corporation of America (NYSE:PKG) Surprises With Q1 Sales But Stock Drops
Packaging Corporation of America (NYSE:PKG) reported revenue ahead of Wall Street's expectations in Q1 CY2025, with sales up 8.2% year on year to $2.14 billion. Its GAAP profit of $2.26 per share was 2% above analysts' consensus estimates. Is now the time to buy Packaging Corporation of America? Find out in our full research report. Revenue: $2.14 billion vs analyst estimates of $2.11 billion (8.2% year-on-year growth, 1.5% beat) EPS (GAAP): $2.26 vs analyst estimates of $2.22 (2% beat) Adjusted EBITDA: $421.1 million vs analyst estimates of $415.3 million (19.7% margin, 1.4% beat) EPS (GAAP) guidance for Q2 CY2025 is $2.41 at the midpoint, missing analyst estimates by 6.6% Operating Margin: 13.1%, up from 9.9% in the same quarter last year Sales Volumes rose 7.6% year on year, in line with the same quarter last year Market Capitalization: $16.26 billion Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, 'A new first quarter revenue record was achieved to begin the new year. In the Packaging segment we had excellent implementation of our previously announced price increases and, although we began to see some pullback in the middle of the quarter related to the uncertainty created by global trade tensions, box demand was solid and exceeded a very strong comparative period in last year's first quarter. Outstanding operational performance and scheduled outage execution at our mills delivered record first quarter containerboard production to meet this demand, and we ended the quarter at targeted inventory levels. Our Paper segment continued to achieve impressive margins with both volume and prices slightly above original estimates. Across the Company, continued emphasis on operational efficiency, cost reduction initiatives, and capital project execution helped minimize the persistent inflation we see throughout most of our cost structure.' Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection. Industrial packaging companies have built competitive advantages from economies of scale that lead to advantaged purchasing and capital investments that are difficult and expensive to replicate. Recently, eco-friendly packaging and conservation are driving customers preferences and innovation. For example, plastic is not as desirable a material as it once was. Despite being integral to consumer goods ranging from beer to toothpaste to laundry detergent, these companies are still at the whim of the macro, especially consumer health and consumer willingness to spend. A company's long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Packaging Corporation of America grew its sales at a sluggish 4.3% compounded annual growth rate. This was below our standard for the industrials sector and is a rough starting point for our analysis. We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Packaging Corporation of America's recent performance shows its demand has slowed as its annualized revenue growth of 1.4% over the last two years was below its five-year trend. Packaging Corporation of America also reports its number of units sold, which reached 1.25 million in the latest quarter. Over the last two years, Packaging Corporation of America's units sold averaged 8.5% year-on-year growth. Because this number is better than its revenue growth, we can see the company's average selling price decreased. This quarter, Packaging Corporation of America reported year-on-year revenue growth of 8.2%, and its $2.14 billion of revenue exceeded Wall Street's estimates by 1.5%. Looking ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average. Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we've identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link. Packaging Corporation of America has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.3%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it's a show of well-managed operations if they're high when gross margins are low. Looking at the trend in its profitability, Packaging Corporation of America's operating margin rose by 2.7 percentage points over the last five years, as its sales growth gave it operating leverage. Its expansion was impressive, especially when considering most Industrial Packaging peers saw their margins plummet. In Q1, Packaging Corporation of America generated an operating profit margin of 13.1%, up 3.2 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead. Revenue trends explain a company's historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions. Packaging Corporation of America's EPS grew at an unimpressive 6.9% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 4.3% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded. Diving into the nuances of Packaging Corporation of America's earnings can give us a better understanding of its performance. As we mentioned earlier, Packaging Corporation of America's operating margin expanded by 2.7 percentage points over the last five years. On top of that, its share count shrank by 5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business. For Packaging Corporation of America, its two-year annual EPS declines of 4.2% show it's continued to underperform. These results were bad no matter how you slice the data. In Q1, Packaging Corporation of America reported EPS at $2.26, up from $1.63 in the same quarter last year. This print beat analysts' estimates by 2%. We also like to analyze expected EPS growth based on Wall Street analysts' consensus projections, but there is insufficient data. We enjoyed seeing Packaging Corporation of America beat analysts' sales volume expectations this quarter. We were also happy its revenue, EPS, and EBITDA outperformed Wall Street's estimates. On the other hand, its EPS guidance for next quarter missed significantly. Overall, we think this was still a solid quarter with some key areas of upside. The guidance seems to be driving the move, and shares traded down 8.1% to $171.30 immediately following the results. Is Packaging Corporation of America an attractive investment opportunity right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free. Sign in to access your portfolio
