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Packaging Corp (PKG) Q4 Earnings & Sales Top Estimates, Up Y/Y

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·4 min read
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Packaging Corporation of America PKG reported adjusted earnings per share (EPS) of $2.76 in fourth-quarter 2021, beating the Zacks Consensus Estimate of $2.08. The bottom line surged 108% year over year.

The upside was primarily driven by higher volume, price and mix in the Packaging segment. The Paper segment witnessed increased prices and mix, lower non-operating pension expenses and lower interest expenses. These were partly offset by higher operating costs, freight and logistics expenses, converting costs, scheduled outage expenses and lower sales volume in the Paper segment.

Including one-time items, earnings in the reported quarter were $2.28 per share compared with the prior-year quarter’s $1.30 per share.

Operational Update

Sales in the fourth quarter rose 19% year over year to $2,043 million. The top line surpassed the Zacks Consensus Estimate of $1,917 million.

The cost of products sold was up 11% year over year to $1,533 million in the fourth quarter. The gross profit surged 53% year over year to $509.9 million. Selling, general and administrative expenses amounted to $141 million compared with the prior-year quarter’s $130 million. The adjusted total segment operating income surged 101% year over year to $341 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 and EPS Surprise

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

Segmental Performance

Packaging: Sales in the segment increased 22% year over year to $1,881 million in the fourth quarter of 2021. The segment’s adjusted operating profit amounted to $363 million in the reported quarter compared with $213 million in the prior-year quarter.

Paper: The segment’s revenues came in at $143 million in the October-December quarter, down 8.6% year over year. The segment reported an adjusted operating profit of $21 million compared with the year-ago quarter’s $2.5 million.

Cash Position

Packaging Corp had a cash balance of $765 million at the end of 2021, down from $1,123 million of cash held at the end of 2020.

2021 Performance

Packaging Corp reported adjusted EPS of $9.39 in 2021 compared with $5.78 reported in the prior year. Earnings beat the Zacks Consensus Estimate of $8.71. Including one-time items, the bottom line came in at $8.83, up 82.4% from $4.84 reported in 2020.

Sales were up 15% year over year to $7.7 billion from the prior-year figure of $6.7 billion. The top line surpassed the Zacks Consensus Estimate of $7.6 billion.

Outlook

Packaging Corp projects first-quarter 2022 EPS to be around $2.50. Its Packaging segment will benefit from higher corrugated products shipments with three additional shipping days. Shipments per day are likely to rise on a year-over-year basis, owing to strong demand and higher domestic and export prices and mix.

In the Paper segment, Packaging Corp expects higher prices and mix from its previously-announced price increase that was executed last November. Also, the company’s recently-announced price hike is likely to add some benefit.

However, the above-mentioned benefits are likely to be offset by persistent higher operating and converting costs as well as elevated freight and logistics expenses. Also, energy and wood costs will flare up due to seasonal colder weather.

Price Performance

Packaging Corp’s shares have gained 4.2% in the past year compared with the industry’s rally of 14.2%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Zacks Rank and Stocks to Consider

Packaging Corporation currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Berry Global Group, Inc. BERY, AGCO Corporation AGCO and Sealed Air Corporation SEE, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Berry Global Group has an estimated earnings growth rate of around 2.9% for fiscal 2022. In the past 60 days, the Zacks Consensus Estimate for fiscal 2022 earnings has been revised 2.5% upward.

In a year, BERY has increased 33.6%. Berry Global Group has a trailing four-quarter earnings surprise of 16.5%, on average.

AGCO Corporation has an expected earnings growth rate of 16.4% for 2022. The Zacks Consensus Estimate for current-year earnings has moved 1.2% north in the past 60 days.

AGCO Corporation’s shares have gained 6.8% in the past year. AGCO has a trailing four-quarter earnings surprise of 47.5%, on average.

Sealed Air has a projected earnings growth rate of 16.8% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved 0.9% north in the past 60 days.

SEE’s shares have soared 53.2% in a year. Sealed Air has a trailing four-quarter earnings surprise of 6.5%, on average.


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