The packaging industry experienced some headwinds over the past few years due to slowing economic activities and geopolitical tensions, but it is well-positioned for a rebound thanks to rising consumer spending and technology advancements.
In order to capitalize on the growing industrial demand and booming e-commerce packaging needs, it could be wise to buy quality packaging stocks AptarGroup, Inc. (ATR), Graphic Packaging Holding Company (GPK), and Veritiv Corporation (VRTV).
The future of packaging is predicted to see service providers’ focus on sustainability, design, production, and operations to deliver a full-spectrum shopping experience. Technological advancements are bringing a new era in the industry, fusing technology with packaging and altering traditional cardboard boxes, bags, and bottles.
The packaging industry benefits from the high demand for food, beverage, and hygiene items that require appropriate packaging for delivery. Growing e-commerce and rising demand for sustainable and eco-friendly packaging options due to rising environmental concerns should boost the industry’s growth. The industrial packaging market is expected to grow at a 7.3% CAGR until 2035.
In addition, the global sustainable packaging market is predicted to grow at a 7.7% CAGR until 2033. The market for sustainable packaging is quickly expanding due to consumer demand, regulatory measures, and increased environmental awareness of packaging waste.
Given this backdrop, let’s discuss the prospects of the featured stocks in detail.
AptarGroup, Inc. (ATR)
ATR designs and manufactures a range of drug delivery, consumer product dispensing, and active material science solutions and services for the pharmaceutical, beauty, personal care, home care, and food and beverage markets. The company operates through three segments: Aptar Pharma; Aptar Beauty; and Aptar Closures.
ATR’s trailing-12-month levered FCF margin of 5.22% is 47% higher than the 3.55% industry average, while its trailing-12-month CAPEX / Sales of 9.44% is 50.9% higher than the industry average of 6.26%.
During the fiscal first quarter that ended March 31, 2023, ATR’s net sales increased marginally year-over-year to $860.07 million. Also, its current assets came in at $1.48 billion for the period that ended March 31, 2023, compared to $1.43 billion for the period that ended December 31, 2022. Its total assets came in at $4.30 billion, compared to $4.20 billion for the same period.
Street expects ATR’s revenue to increase 5.6% year-over-year to $3.51 billion for the year ending December 2023. Its EPS is expected to grow 12.1% year-over-year to $4.25 for the same period. It surpassed EPS estimates in three of four trailing quarters. Over the past nine months, the stock has gained 21.3% to close the last trading session at $119.33.
ATR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ATR has an A grade for Stability and Sentiment and a B for Growth and Quality. Within the B-rated Industrial - Packaging industry, it is ranked #5 out of 22 stocks. Click here for the additional POWR Ratings for Momentum, Sentiment, Stability, and Quality for ATR.
Graphic Packaging Holding Company (GPK)
GPK is a leading sustainable fiber-based packaging solution provider for different industries, including food, beverages, food service, and other consumer products. Its segments include Paperboard Mills; Americas Paperboard Packaging; and Europe Paperboard Packaging.
GPK’s forward Price/Sales multiple of 0.74 is 37% lower than the industry average of 1.17. Its forward EV/Sales multiple of 1.28 is 18.4% lower than the industry average of 1.57.
GPK’s trailing-12-month ROCE of 29.22% is 173.6% higher than the industry average of 10.68%. Its trailing-12-month levered FCF margin of 5.66% is 59.4% higher than the industry average of 3.55%.
In the first quarter that ended on March 31, 2023, GPK’s net sales increased 8.6% year-over-year to $2.44 billion, while its income from operations increased 70.9% from the year-ago value to $330 billion.
The company’s adjusted net income and adjusted EPS amounted to $237 million and $0.77, representing increases of 59.1% and 60.4% from the prior-year quarter, respectively. Also, its adjusted EBITDA increased 38.3% year-over-year to $484 million.
The consensus revenue estimate of $9.97 billion for the year ending December 2023 represents a 5.6% increase year-over-year. Its EPS is expected to grow 28.1% year-over-year to $2.98 for the same period. It surpassed EPS estimates in all four trailing quarters. GPK’s shares have gained 15.1% over the past year to close the last trading session at $23.81.
It’s no surprise that GPK has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Value. It is ranked #7 in the same industry.
Beyond what is stated above, we’ve also rated GPK for Stability, Sentiment, Momentum, and Quality. Get all GPK ratings here.
Veritiv Corporation (VRTV)
VRTV operates as a business-to-business provider of value-added packaging products and services, facility solutions, and print-based products and services in the United States and internationally. It operates through Packaging; Facility Solutions; and Print segments.
VRTV’s forward EV/Sales of 0.37x is 79.3% lower than the industry average of 1.80x. Its forward Price/Sales of 0.29x is 79.6% lower than the industry average of 1.41x.
VRTV’s trailing-12-month ROCE of 43.83% is 214.4% higher than the industry average of 13.94%. Also, the stock’s 3x trailing-12-month asset turnover ratio is 275.7% higher than the 0.80x industry average.
For the fiscal first quarter ended March 31, 2023, VRTV’s net sales came in at $1.51 billion. Its operating income increased 8.8% year-over-year to $94.90 million. The company’s net cash provided by operating activities came in at $70.90 million, compared to net cash used for operating activities of $5.90 million in the prior-year period.
Its net income and EPS came in at $68.70 million and $5, respectively. Additionally, its adjusted EBITDA came in at $103.80 million.
Analysts expect VRTV’s revenue to increase marginally year-over-year to $6.43 billion for the year ending December 2024. Its EPS is expected to come in at $17.60 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 26.2% over the past nine months to close the last trading session at $135.92.
VRTV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #4 in the same industry. It has an A grade for Value and a B for Quality. To see additional VRTV ratings for Sentiment, Growth, Momentum, and Stability, click here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
ATR shares were unchanged in premarket trading Friday. Year-to-date, ATR has gained 9.20%, versus a 19.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
3 Packing Stocks to Buy and Hold StockNews.com
