Yahoo Finance Why Is Packaging Corp. (PKG) Down 0.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Packaging Corp. (PKG). Shares have lost about 0.9% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Packaging Corp. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Packaging Corp Q4 Earnings Beat Estimates, Dip Y/Y
Packaging Corporation of America reported adjusted earnings per share of $2.35 in fourth-quarter 2022, beating the Zacks Consensus Estimate of $2.24 per share. The bottom line decreased 15% year over year. However, it came above the company’s guidance of $2.22 per share.
The decline was driven by lower volumes in the Packaging and Paper segments, higher operating costs, rising freight and logistic expenses, and raised depreciation expenses. Higher converting costs and scheduled maintenance outage expenses affected the results. These headwinds were somewhat offset by rising prices and mix in the Packaging segment, declining freight and logistics expenses, a reduced share count resulting from share repurchases, and a lower tax rate.
Including special items (primarily for certain costs at the Jackson, AL mill for paper-to-containerboard conversion-related activities), earnings in the reported quarter were $2.31 per share compared with the prior-year quarter’s $2.28 per share.
Operational Update
Sales in the fourth quarter declined 3.2% year over year to $1,978 million and missed the Zacks Consensus Estimate of $2,055 million.
The cost of products sold was down 0.3% year over year to $1,528 million in the fourth quarter. The gross profit declined 11.7% year over year to $450 million.
Selling, general and administrative expenses amounted to $146 million, up from the prior year’s $141 million. The total segment operating income fell 19% year over year to $288 million.
Segmental Performance
Packaging: Sales in the segment decreased 3.8% year over year to $1,809 million in the fourth quarter of 2022. The segment’s adjusted operating profit amounted to $284 million in the reported quarter from $363 million in the prior-year quarter.
Paper: The segment’s revenues were $154 million in the October-December quarter, up 7.7% year over year. The segment reported an adjusted operating profit of $34 million compared with the year-ago quarter’s $21 million.
Cash Position
Packaging Corp had a cash balance of around $470 million at the end of the fourth quarter of 2022, down from $765 million of cash held at the end of the prior-year quarter.
2022 Performance
Packaging Corp reported adjusted earnings per share of $11.14 in 2022 compared with $9.39 reported in the prior year. Earnings beat the Zacks Consensus Estimate of $11.01. Including one-time items, the bottom line was $11.03, up 25% from the $8.83 reported in 2021.
Sales were up 10.4% year over year to $8.5 billion from the prior-year figure of $7.7 billion. The reported figure was in line with the Zacks Consensus Estimate.
Guidance
Packaging Corp projects first-quarter 2023 earnings of $2.23 per share. The company expects its Packaging segment to deliver a higher total volume, with corrugated plants having four additional shipping days. Prices will fall as a result of the recent reductions in published domestic containerboard prices. The company anticipates lower export prices as well.
In the Paper segment, Packaging Corp expects prices to move slightly higher, with fairly flat sales volume.
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 -5.55% due to these changes.
VGM Scores
At this time, Packaging Corp. has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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.
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Packaging Corporation of America (PKG) : Free Stock Analysis Report
