Over the past year, concerns surrounding inflationary pressures, interest rate hikes, and weakening consumer demand affected the packaging industry. However, the sector is constantly evolving with increased demand for sustainable solutions, smart packaging tech, and e-commerce.
Therefore, it could be wise for investors to check out some quality packaging stocks such as Berry Global Group, Inc. (BERY), AptarGroup Inc. (ATR), and Graphic Packaging Holding Company (GPK).
The packaging materials industry enjoys demand from various sectors such as healthcare, real estate, manufacturing, automotive, electronics, food and beverages, education, and home appliances.
As the packaging industry continues to show some noteworthy trends like sustainability through recycling and reusability, flexible packaging, and e-commerce, the market forecasts the packaging industry to grow at a CAGR of 2.8% to $1.05 trillion in 2024, with many vendors improving their strategies to grow their market share consistently.
Moreover, over the past few years, the ever-increasing popularity of recyclable and biodegradable packaging materials with ever-increasing industrialization across the globe is expected to stimulate the demand for industrial packaging solutions at a CAGR of 4.3% to $107 billion through 2033.
According to McKinsey & Company’s global survey, 43% of the respondents prioritize the environmental impact of packaging when making purchasing decisions, and a significant number of consumers are willing to pay a higher price for sustainable packaging.
Furthermore, with the rapid increase in online shopping, the e-commerce packaging market is expected to reach $341.27 billion by 2032, registering an impressive CAGR of 17.1%.
Given the robust growth projections, it could be worth considering fundamentally sound packaging stocks BERY, ATR, and GPK to garner substantial returns. Let’s look into these stocks.
Berry Global Group, Inc. (BERY)
BERY manufactures and supplies non-woven, flexible products in consumer and industrial end markets. The company operates through Consumer Packaging International; Consumer Packaging North America; Engineered Materials; and Health, Hygiene & Specialties segments, serving some of the largest brands in the world across several industries.
On June 15, backed by its strong financials, the company paid its shareholders a quarterly dividend of $0.25 per share. BERY’s four-year average yield is 0.12%, while its annual dividend translates to a 1.50% yield on current prices.
On April 14, BERY announced the expansion of its stretch film manufacturing facilities in Lewisburg, Tennessee, to meet the increasing demand for its sustainable stretch films. The expansion is set to add 25,000 square feet of space for three new cast lines, upgrade the capacity of the facilities existing Post-Industrial Resin (PIR) reprocessing system, and extend the rail spur for resin material handling.
This expansion is expected to improve BERY’s production capacity and processing capabilities, potentially leading to increased sales and revenue for the company.
In the fiscal second quarter (ended April 1, 2023), BERY’s net sales amounted to $3.29 billion. The company’s net income stood at $174 million, while its adjusted net income per share increased 4.3% year-over-year to $1.96. In addition, its total liabilities and stockholders’ equity stood at $16.61 billion, declining 2% compared to $16.96 billion as of October 1, 2022.
BERY is expected to witness an EPS growth of 0.3% for the fiscal year (ending September 2023), to reach $7.42, while its revenue is expected to amount to $13.16 billion. Its EPS and revenue are projected to reach $8.26 and $13.53 billion in the fiscal year 2024, registering increases of 11.3% and 2.8% year-over-year, respectively. Moreover, it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 37.9% over the past nine months to close the last trading session at $66.66.
BERY’s POWR Ratings reflect this favorable outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth and Value. In the 22-stock B-rated Industrial - Packaging industry, it is ranked #6. To see additional POWR Ratings for Momentum, Stability, Sentiment, and Quality for BERY, click here.
AptarGroup Inc. (ATR)
ATR engages in drug delivery, consumer product dispensing, and active material science solutions and serves brands in the beauty, personal care, home care, food, beverages, and pharmaceuticals sector. The three segments through which the company operates are- Aptar Pharma; Aptar Beauty; and Aptar Closures.
On July 13, the company announced an increase in its quarterly dividends by 7.9% from the previous quarter to $0.41 per share, payable to its shareholders on August 17, 2023. This reflects the company’s strong cash flows and ability to boost the shareholders’ returns.
ATR’s four-year average yield is 1.27%, while its annual dividend of $1.64 translates to a 1.38% yield on the prevailing prices. Its dividend payouts have increased at a CAGR of 3.5% over the past five years. Also, it has a record of 29 years of consecutive dividend growth.
On May 24, the company was eulogized by USA Today as one of America’s Climate Leaders on its inaugural list of 400 US companies. This move made the company one of the top rankers patronizing the decarbonization movement since 2019, which is expected to help to maintain a competitive edge in the industry.
Moreover, after significantly surpassing its original Scope 1 and 2 targets, ATR validated its revised Scope 1 and Scope 2 reduction target by the Science Based Targets initiative (SBTi) in early March 2023 to align with the requirements to keep global warming at 1.5° Celsius by 2030. This further underscores its commitment to sustainability.
ATR’s net sales increased marginally year-over-year to $860.07 million in the first quarter that ended on March 31, 2023. The adjusted net income attributable to ATR came in at $63.27 million and $0.95 per share, representing increases of 1.2% and 2.2% from the same period last year. Also, its net cash from operations stood at $98.30 million, up 6.8% from the prior-year quarter.
Analysts predict ATR’s revenue to increase 6.4% year-over-year to $898.79 million for the fiscal second quarter (ended June 30, 2023). Its EPS estimate of $1.14 for the to-be-reported quarter is expected to register an 18.3% year-over-year growth. Moreover, it topped the EPS estimates in all the trailing four quarters, which is promising.
ATR’s shares have gained 19.9% over the past nine months and 21.4% over the past year to close the last trading session at $119.08.
ATR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Stability and Sentiment and a B for Growth and Quality. Within the same B-rated industry, it is ranked #5. Click here to see the other ratings of ATR for Value and Momentum.
Graphic Packaging Holding Company (GPK)
GPK is a leading sustainable fiber-based packaging solution provider for different industries, including food, beverages, foodservice, and other consumer products. Its segments include Paperboard Mills; Americas Paperboard Packaging; and Europe Paperboard Packaging.
The company’s four-year average dividend yield is 1.72%, and its current dividend of $0.40 translates to a 1.65% yield. Its dividends have grown at a 7.7% CAGR over the past three years and a 4.6% CAGR over the past five years. GPK paid a quarterly dividend of $0.10 per share of its common stock on July 5.
During 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 improved by 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 EPS estimate of $0.75 for the second quarter (ended June 30, 2023) represents a 25.4% improvement year-over-year. The consensus revenue estimate of $2.50 billion for the about-to-be-reported quarter indicates a 5.9% increase from the prior-year period. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 19.4% to close the last trading session at $24.21.
It’s no surprise that GPK has an overall rating of B, which translates to Buy in our proprietary rating system. It has an A grade for Growth and a B for Value. Out of 22 stocks in the same industry, it is ranked #7.
In addition to the POWR Ratings we’ve stated above, we also have GPK’s ratings for Momentum, Stability, Sentiment, and Quality. Get all GPK ratings here.
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BERY shares were trading at $66.68 per share on Wednesday afternoon, up $0.02 (+0.03%). Year-to-date, BERY has gained 11.27%, versus a 19.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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