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Packaging Corporation Hits 52-Week High: What's Driving It?

Zacks Equity Research

Shares of containerboard and packaging products manufacturer Packaging Corporation of America PKG scaled a 52-week high of $102.83 on May 10, before ending the day a tad lower at $102.69. The shares have yielded a return of 21.9%, year to date.

This Lake Forest, IL-based company has a market cap of $9.48 billion. Meanwhile, average volume of shares traded in the last three months is approximately 768K. The company has delivered an average positive surprise of 3.41% in the last four quarters. Packaging Corporation has a long-term earnings growth expectation of 13%.

Growth Drivers

Packaging Corporation’s share price has gained 2.5% since earnings release on Apr 27, outperforming the Zacks Categorized Containers- Paper/Plastic sub industry’s gain of 0.9%.

Packaging Corporation reported first-quarter 2017 earnings per share of $1.27, a 14% improvement year over year. Earnings also beat the Zacks Consensus Estimate of $1.24. Improved results were driven by strong demand and higher prices for containerboard and corrugated products. Further, the recent TimBar and Columbus Container acquisitions boosted results. The company continued to implement containerboard and corrugated products price increases which helped counter higher inflation in manufacturing and converting costs as well as higher freight costs.

Packaging Corporation of America Price and Consensus

Packaging Corporation of America Price and Consensus | Packaging Corporation of America Quote

The integration of the recent corrugated plant acquisitions is on track. The containerboard inventory levels were below those of a year ago and year-end levels despite the additional containerboard inventory requirements of acquisitions.

In the second quarter, the company will continue to implement its previously announced packaging segment price increases. Corrugated products shipments are anticipated to be higher owing to strong demand and the two recent acquisitions. The company has projected earnings per share of $1.45 for the quarter. Compared with the earnings per share of $1.25 in the second quarter of 2016, the projected guidance reflects growth of 16%.

Pentair currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same sector include AGCO Corporation AGCO, Caterpillar, Inc. CAT and Rockwell Automation Inc. ROK. All of them flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has an average positive earnings surprise of 40.39% in the trailing four quarters. AGCO’s shares have gained 11.5% year to date. Caterpillar generated an average positive earnings surprise of 40.25% in the past four quarters and its shares have yielded a year-to-date return of 10%. Rockwell Automation has an average positive earnings surprise of 9.89%. Rockwell Automation shares have gained 17.8% year to date.

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