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Valued at a market cap of $18.3 billion, Packaging Corporation of America (PKG) is the third largest producer of containerboard products and a leading manufacturer of uncoated freesheet paper in North America. The Illinois-based company operates through three segments: Packaging; Paper; and Corporate and Other, offering a wide range of packaging and paper products.
Shares of this packaging company have outperformed the broader market over the past 52 weeks. PKG has rallied 40.2% over this time frame, while the broader S&P 500 Index ($SPX) has gained 27%. In 2024, shares of PKG are up 25.1%, compared to SPX’s 18.1% gain on a YTD basis.
Zooming in further, PKG’s outperformance looks even more pronounced when compared to the S&P 500 EW Materials Invesco ETF’s (RSPM) 13.6% gain over the past 52 weeks and 7.2% return on a YTD basis.
PKG’s outperformance is driven by strong growth in e-commerce activities leading to higher packaging demand and improvement in order levels. The company’s strategic actions, including strategic mergers and acquisitions, have also contributed to its price appreciation.
Moreover, the stock recovered marginally following its Q2 earnings release on Jul. 23, due to better-than-expected earnings of $2.20 per share, driven by strong demand and higher pricing for corrugated packaging products. Additionally, revenue also surpassed estimates, reaching $2.08 billion, supported by a 9.2% increase in corrugated product shipments, and the company forecasted a higher-than-expected profit for Q3.
For the current fiscal year, ending in December, analysts expect PKG’s EPS to grow marginally year over year to $8.71. The company’s earnings surprise history is promising. It beat the consensus estimates in each of the last four quarters.
Among the seven analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on three “Strong Buy” ratings and four “Holds.”
On Jul. 25, Wells Fargo maintained an “Overweight” rating on Packaging Corporation and raised the price target to $215, noting the company’s commercial plus operational strategy, well-invested assets, and potential increase in capital return.
The mean price target of $207.17 represents a premium of just 1.6% to PKG’s current levels. The Street-high price target of $219, implies a potential upside of 7.5% from the current price.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
