Why Is Packaging Corp. (PKG) Up 3.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Packaging Corp. (PKG). Shares have added about 3.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Packaging Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Packaging Corp Earnings & Sales Beat Estimates in Q2

Packaging Corporation reported adjusted earnings per share of $3.23 in second-quarter 2022, beating the Zacks Consensus Estimate of $2.87. The bottom line improved 49% year over year.

The upside was primarily driven by higher volume, price and mix in the Packaging segmenthigher prices and mix in the Paper segment, lower scheduled outage expenses and interest expenses and a reduced share count. These gains were somewhat offset by elevated operating and converting costs, freight and logistics expenses, depreciation expenses and lower volume in the Paper segment, as well as a higher tax rate.

Including one-time items, earnings in the reported quarter was $3.20 per share compared with the prior-year quarter’s $2.17 per share.

Operational Update

Sales in the first quarter rose 19% year over year to $2,237 million. The top line surpassed the Zacks Consensus Estimate of $2,133 million.

The cost of products sold was up 15% year over year to $1,648 million in the second quarter. The gross profit surged 31% year over year to $589 million. Selling, general and administrative expenses amounted to $157 million compared with the prior-year quarter’s $146 million. The adjusted total segment operating income climbed 43% year over year to $418.8 million.
Segmental Performance

Packaging: Sales in the segment increased 20% year over year to $2,067 million in the second quarter of 2022. The segment’s adjusted operating profit amounted to $413 million in the reported quarter compared with $314 million in the prior-year quarter.

Paper: The segment’s revenues were $150 million in the April-June quarter, up 5.3% year over year. The segment reported an adjusted operating profit of $26 million compared with the year-ago quarter’s $5.4 million.

Cash Position

Packaging Corp had a cash balance of $811 million at the end of the second quarter of 2022, down from $1,124 million of cash held at the end of the prior-year quarter.

Guidance

Packaging Corp projects third-quarter 2022 EPS to be around $2.80.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -8.91% due to these changes.

VGM Scores

Currently, Packaging Corp. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Packaging Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Packaging Corp. belongs to the Zacks Containers - Paper and Packaging industry. Another stock from the same industry, Sonoco (SON), has gained 3.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.

Sonoco reported revenues of $1.91 billion in the last reported quarter, representing a year-over-year change of +38.4%. EPS of $1.76 for the same period compares with $0.84 a year ago.

Sonoco is expected to post earnings of $1.43 per share for the current quarter, representing a year-over-year change of +57.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Sonoco has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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