Packaging Firm Grows Earnings In Competitive Market


Investors often settle for lagging price performance and shoddy fundamentals just to get a big dividend.

InPackaging Corp. of America 's ( PKG ) case, not only are you getting a nice yield, but you're also getting solid fundamentals and relative price strength.

The company is the fourth-largest producer of containerboard and corrugated packaging products in the U.S. It operates four paper mills and 71 corrugated products plants in 26 states, serving the food and beverage, paper and agricultural markets.

Fundamentals are strong. Pretax profit margin hit a three-year high of 14.3% in 2012. Annual return on equity was also solid at 21%. It sports an annual dividend yield of 3.2%.

In the first quarter, earnings rose 48% from a year ago to 62 cents a share. Sales rose 12% to $755.2 million. CEO Mark Kowlzan said he expects stronger volume and higher prices in the second quarter but said the earnings benefit from price increases won't be realized until the third quarter.

From a technical perspective, its flat-base structure showed several tight weekly closes ahead of Thursday's breakout over 50.88. Its recent pullback was well contained as the stock held above its 10-week moving average. Several above-average volume price gains point toward a stock under accumulation.

Packaging Corp. of America isn't the only strong performer in IBD's Paper & Paper Products group. The group boasts a few other stocks hitting new highs with solid Composite Ratings, includingSchweitzer Mauduit ( SWM ),Albany International ( AIN ) andRock Tenn ( RKT ).

Earnings are due July 16 after the close. The consensus estimate calls for profit of 63 cents a share, up 29% from a year ago with sales up 8% to $769 million.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas

Referenced Stocks: AIN , PKG , RKT , SWM

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