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Packaging Corp's (PKG) Q3 Earnings & Sales Top Estimates

Packaging Corporation of America PKG reported adjusted earnings per share of $1.57 in third-quarter 2020, surpassing the Zacks Consensus Estimate of $1.36. However, the reported figure declined 18.2% year over year.

This decline resulted from lower prices and mix in the Packaging and Paper segments, dismal volumes in the Paper segment, as well as higher scheduled maintenance outage costs. These negatives were partly offset by higher volumes in Packaging segment, lower operating costs as well as softer converting and other costs.

Including one-time items, earnings in the reported quarter came in at $1.46 per share compared with the prior-year quarter’s $1.89.

Operational Update

Sales for the September-end quarter declined 3.3% year over year to $1,694 million. The reported figure, however, beat the Zacks Consensus Estimate of $1,657 million.

Cost of products sold was up 0.6% year over year to $1,348 million in the third quarter. Gross profit went down 16% year over year to $345 million. Selling, general and administrative expenses came in at $127 million, marking a fall of 7.3%. Adjusted total segment operating income dipped 16.2% year over year to $223 million.

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 increased to $1,501 million from the $1,490 million recorded in the year-earlier period. Segmental income, excluding special items, came in at $236 million in the quarter compared with the $238 million witnessed in the prior-year period.

Printing Papers: This segment’s revenues slipped 27% year over year to $178 million in the third quarter. The segment reported adjusted operating profit of $7.3 million compared with the year-ago quarter’s $48.1 million.

Cash Position

The company had a cash balance of $949 million as of the end of the July-September quarter, up from the year-earlier quarter end’s figure of $738 million.

Outlook

Packaging Corporation has not issued any guidance for the fourth quarter given the uncertainty related to the pandemic and its impact on the global economy. The company expects to benefit from solid corrugated products demand in the remaining part of the current quarter. The company also expects higher freight and scheduled maintenance outage costs during the ongoing quarter.

Share Price Performance

Packaging Corporation’s stock has gained 17.8% over the past six months, outperforming the industry’s growth of 16.8%.



Zacks Rank and Other Stocks to Consider

Packaging Corporation currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Industrial Products sector include Sealed Air Corporation SEE, Lawson Products, Inc. LAWS and Fortune Brands Home & Security, Inc. FBHS, each carrying a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sealed Air has a projected earnings growth rate of 3.9% for the current year. Shares of the company have gained 46.9% over the past six months.

Lawson Products has an estimated earnings growth rate of 3.4% for 2020. The company’s shares have rallied 59.8% in the past six months.

Fortune Brands has an expected earnings growth rate of 6.9% for the ongoing year. In the past six months, the stock has surged 105.7%.

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