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Packaging Corp's (PKG) Q2 Earnings as Expected, Increase Y/Y

Zacks Equity Research

Packaging Corporation of America PKG delivered adjusted earnings per share of $2.04 in second-quarter 2019, in line with the Zacks Consensus Estimate. The reported figure declined 2% year over year. Earnings came in below management’s guidance of $2.05 per share. Earnings declined due to higher operating and converting costs, lower volume in Paper segment and higher annual outage expenses. However, these were partly offset by higher volume in the Packaging segment, favorable price and mix, elevated prices in the Paper segment and lower conversion costs in the Wallula mill.

Operational Update

Sales for the April-June quarter went down to $1.76 billion from the prior-year quarter’s $1.77 billion. The reported figure, however, lagged the Zacks Consensus Estimate of $1.79 billion.

Cost of products sold edged down 1.1% year over year to $1.33 billion in the reported quarter. Gross profit inched up around 1.7% to $428 million from the $420.6 million witnessed in the prior-year quarter. Selling, general and administrative expenses flared up 4.3% to $143.7 million from the $137.7 million incurred in the year-ago quarter.

Packaging Corporation of America Price, Consensus and EPS Surprise

Packaging Corporation of America Price, Consensus and EPS Surprise

Packaging Corporation of America price-consensus-eps-surprise-chart | Packaging Corporation of America Quote

Segmental Performance

Packaging: Sales in this segment went up to $1,504.6 million from $1,496.2 million in the year-earlier period. Segmental income, excluding special items, came in at $264 million for the June-end quarter compared with $279 million witnessed in the comparable period last year.

Printing Papers: This segment’s revenues slipped 5.2% year over year to $237.8 million in the quarter due to discontinuation of the paper business in the Wallula Mill. Segmental income, excluding special items, increased to approximately $38.8 million from the $24.4 million recorded in the year-earlier period.

Cash Position

At the end of the second quarter, the company had a cash balance of $569.4 million compared with $199.6 million recorded at the end of the prior-year quarter.

Outlook

Packaging Corporation anticipates seasonally higher containerboard and corrugated products shipments in third-quarter 2019. Seasonally stronger volume is expected in the Paper segment. Moreover, operating and maintenance outage costs will likely drop. Considering these, the company now projects earnings per share of $1.91 for the ongoing quarter.

Share Price Performance

Over the past year, Packaging Corporation’s stock has depreciated around 3.7% compared with the industry’s decline of 27.2%.



Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector are Roper Technologies, Inc. ROP, John Bean Technologies Corp. JBT and CECO Environmental Corp. CECE, each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here

Roper Technologies has an estimated earnings growth rate of 9.8% for 2019. The company’s shares have gained 30.3% in the past year.

John Bean Technologies has an expected earnings growth rate of 5.9% for the current year. The stock has appreciated 33.1% in a year’s time.

CECO Environmental has an impressive projected earnings growth rate of 84.8% for the ongoing year. The company’s shares have rallied 29.6% over the past year.

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