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Packaging Corp (PKG) to Post Q2 Earnings: What's in Store?

Zacks Equity Research

Packaging Corporation of America PKG is set to release second-quarter 2020 results, after the closing bell on Jul 28.

Q1 Results

The company reported a year-over-year decline in both earnings and revenues in the first quarter. However, the company beat the Zacks Consensus Estimate on both counts.

Q2 Estimates

The Zacks Consensus Estimate for Packaging Corporation’s second-quarter earnings is currently pegged at $1.28, suggesting a decline of 37.3% from the prior-year quarter. The Zacks Consensus Estimate for total sales stands at $1.67 billion, indicating a decline of 5% from the year-ago quarter.

The Zacks Consensus Estimate for the second-quarter earnings has gone down 1% over the past 30 days.

The company surpassed the Zacks Consensus Estimate in two of the trailing four quarters, while coming in-line in the remaining two. Packaging Corporation has a trailing four-quarter earnings surprise of 6.51%, on average.

Packaging Corporation of America Price and EPS Surprise

Packaging Corporation of America Price and EPS Surprise
Packaging Corporation of America Price and EPS Surprise

Packaging Corporation of America price-eps-surprise | Packaging Corporation of America Quote

Factors to Note

Packaging products are essential for the distribution of food, beverage and pharmaceutical products. Hence, the elevated demand for meat, fruit and vegetables, processed food, beverages, medicine, and other consumer products owing to the coronavirus crisis is expected to have benefited the segment’s second-quarter performance.

The company has been gaining from the e-commerce boom, driven by demand for boxes. Additionally, the coronavirus pandemic has been fueling e-commerce growth as consumers’ demand for online grocery, beverage and pharmaceuticals delivery services have been increasing following the travel restrictions imposed by governments worldwide. These factors might have contributed to the company’s second-quarter performance.

Meanwhile, the pandemic has affected paper consumption in schools, offices and businesses, straining paper demand. To balance the supply of Boise Paper products with demand, Packaging Corporation temporarily idled both paper machines and the sheet-converting operation at its Jackson Mill in Jackson, AL for the months of May and June 2020. This move may have reduced paper production by approximately 70,000 tons in the second quarter. This is likely to get reflected in the company’s results in the quarter to be reported.

Segment Expectations

The Zacks Consensus Estimate for the segment’s quarterly net sales is pegged at $1,466 million, suggesting a decline of 3% from the prior-year period. The Zacks Consensus Estimate for the segment’s adjusted operating income stands at $185 million, indicating a year-on-year plunge of 30%.

The Zacks Consensus Estimate for the Paper segment’s revenues is currently pegged at $176 million, suggesting a decline of 26% from the year-ago reported figure. The Zacks Consensus Estimate for the segment’s adjusted operating income stands at $15.9 million, indicating a plunge of 59% from the year-earlier quarter.

Earnings Whispers

Our proven model predicts an earnings beat for Packaging Corporation this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Packaging Corporation is +7.03%.

Zacks Rank: Packaging Corporation currently carries a Zacks Rank of 3.

Price Performance

In a year’s time, shares of Packaging Corporation have gained 4.7% against the industry’s decline of 2.5%.

Other Stocks Poised to Beat Earnings Estimates

Here are some other Industrial Products stocks, which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.

Allegion plc ALLE has an Earnings ESP of +2.27% and a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lincoln Electric Holdings, Inc. LECO currently has a Zacks Rank #2 and an Earnings ESP of +5.50%.

W.W. Grainger, Inc. GWW currently has a Zacks Rank #3 and an Earnings ESP of +13.76%.

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