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Packaging Corp's (PKG) Q4 Earnings & Sales Miss Estimates

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Zacks Equity Research
·4 min read
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Packaging Corporation of America PKG reported adjusted earnings per share of $1.33 in fourth-quarter 2020, which missed the Zacks Consensus Estimate of $1.42. The reported figure declined 22.2% year over year.

The downside was caused by lower prices and mix in the Packaging and Paper segments, dismal volumes in the Paper segment, higher scheduled maintenance outage costs as well as higher freight expenses and a higher tax rate. These negatives were partly offset by higher volumes in the Packaging segment and lower operating costs.

Including one-time items, earnings in the reported quarter came in at $1.30 per share compared with the prior-year quarter’s figure of $1.43 per share.

Operational Update

Sales in the fourth quarter inched down 0.3% year over year to $1,714 million. The reported figure was unable to beat the Zacks Consensus Estimate of $1,727 million.

Cost of products sold was up 3.3% year over year to $1,381 million in the fourth quarter. Gross profit fell 13% year over year to $333 million. Selling, general and administrative expenses came in at $130 million, down 5%. Adjusted total segment operating income fell 18% year over year to $193 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 to $1,541 million from the $1,460 million recorded in the year-earlier period. Segmental income, excluding special items, came in at $212.8 million in the quarter compared with the $215.6 million witnessed in the prior-year quarter.

Printing Papers: This segment’s revenues plunged 36% year over year to $156 million in the fourth quarter. The segment reported adjusted operating profit of $2.5 million compared with the year-ago quarter’s $42.9 million.

FY 2020 Results

Packaging Corporation reported adjusted earnings per share of $5.78 in 2020, down 24.4% from the prior-year’s figure of $7.65. Earnings missed the Zacks Consensus Estimate of $5.85. Including one-time items, the bottom line came in at $4.84, down 34% from $7.34 recorded in 2019.

Sales declined 4.4% year over year to $6.66 billion from the prior-year’s figure of $6.96 billion. The top-line figure was in line with the Zacks Consensus Estimate.

Cash Position

The company had a cash balance of $974.6 million as of the end of 2020, up from the $679.5 million at the end of 2019.

Outlook

Packaging Corporation expects the demand in its packaging segment to remain strong, with an increase in shipments from the year-ago quarter’s levels. It expects to realize majority of the recently announced packaging segment price increase during the first quarter. It also expects an increase in the average export prices. The company also anticipates continued higher freight and labour costs. Seasonally colder weather will likely lead to energy and wood costs and prices for recycled fiber are expected to trend higher as well.

Price Performance

Packaging Corp’s stock has gained 29.5% in the past year compared with 16% rise of the industry.

Zacks Rank and Key Picks

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

Some better-ranked stocks in the industrial products sector are AGCO Corporation AGCO, Alcoa Corp. AA and Crown Holdings, Inc. CCK.

AGCO Corp. has an expected earnings growth rate of 15.8% for the current fiscal. The company’s shares have gained around 46% in the past year. It currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alcoa has an expected earnings growth rate of 240.5% for the current fiscal. The company’s shares have gained around 28.7% in the past year. It currently carries a Zacks Rank #2 (Buy).

Crown Holdings has an expected earnings growth rate of 11.7% for the current fiscal. The company’s shares have gained around 15% in the past year. It currently carries a Zacks Rank #2.

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