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What's in the Offing for Packaging Corp's (PKG) Q3 Earnings?

Zacks Equity Research

Packaging Corporation of America PKG is set to release third-quarter 2019 results, after the closing bell on Oct 23.
Which Way are the Estimates Headed?

The Zacks Consensus Estimate for Packaging Corporation’s to-be-reported quarter’s earnings is currently pinned at $1.90, reflecting a year-over-year fall of 14.8%. The Zacks Consensus Estimate for total sales of $1,766 million suggests a 2.4% drop, year on year.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Packaging Corporation’s third-quarter 2019 performance will likely reflect benefits from seasonally-higher containerboard and corrugated products shipments as well as lower effective tax rate. These gains are likely to have been offset by lower prices and higher converting costs. Also, the company’s quarterly results are expected to have been adversely impacted by annual outage costs and higher freight and repair costs.
Packaging Corporation will benefit from the e-commerce boom that will lead to increase in demand in boxes, in the upcoming period. These days, customers find a lot of different channels to sell-through, including e-commerce. The company has a wide base of customers and expects the business to grow. This momentum is expected to have continued in the third quarter as well.

Coming to the segments, the Zacks Consensus Estimate for the Packaging segment’s net sales is pegged at $1,540 million for the quarter, calling for 0.3% expected year-over-year growth. The Zacks Consensus Estimate for adjusted operating income of the segment is pegged at $254 million, indicating year-over-year decline of 12.4%.

The Zacks Consensus Estimate for the Paper segment’s revenues is currently pinned at $244 million, suggesting a 4% fall from the prior-year quarter’s $254 million. The company’s discontinuation of the production of uncoated free sheet and coated one-side grades at the Wallula, WA mill helped optimize the entire containerboard system platform, and improved its manufacturing and freight costs. These opportunities have aided the company in boosting mill capacity. This move is anticipated to have been conducive to the segment’s margin for the July-September quarter.

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

Earnings Whispers

Our proven model does not conclusively predict that the Packaging Corporation is likely to beat the Zacks Consensus Estimate this quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Packaging Corporation has an Earnings ESP of -1.16%. This is because currently the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.88 and $1.90, respectively.

Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell).

Price Performance

In a year’s time, shares of Packaging Corporation have gained 21%, as against the industry’s loss of 26%.

Stocks to Consider

Here are a few Industrial Products stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

John Bean Technologies Corporation JBT has an Earnings ESP of +0.55% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northwest Pipe Company NWPX, a Zacks #3 Ranked stock, has an Earnings ESP of +19.23%.

Sealed Air Corporation SEE has an Earnings ESP of +2.40% and holds a Zacks Rank of 3, at present.

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