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Factors Setting the Tone for Packaging Corp's (PKG) Q1 Earnings

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Packaging Corporation of America (PKG - Free Report) is set to release first-quarter 2022 results after the closing bell on Apr 25.

Q4 Results

In the last reported quarter, Packaging Corp’s earnings and revenues beat the respective Zacks Consensus Estimate and increased year over year. The company has a trailing four-quarter earnings surprise of 22.7%, on average.

Q1 Estimates

The Zacks Consensus Estimate for Packaging Corp’s first-quarter earnings per share is currently pegged at $2.53, suggesting growth of 42.9% from the prior-year quarter’s levels. The Zacks Consensus Estimate for total sales is pinned at $2.06 billion, indicating a rise of 13.9% from the year-ago quarter’s levels.

Factors at Play

Packaging products are essential for distributing food, beverage and pharmaceutical products. The elevated demand for meat, fruit and vegetables, processed food, beverages, medicine and other consumer products in response to the coronavirus pandemic is expected to have aided the Packaging segment’s January-March quarter performance. The segment accounts for around 91% of the company’s revenues. Strong demand for containerboard and corrugated products is likely to have driven the segment. PKG is likely to have witnessed higher corrugated product shipments with three additional shipping days in the first quarter.

The Zacks Consensus Estimate for the segment’s quarterly revenues is pegged at $1,910 million, calling for a year-over-year jump of 18%. The consensus mark for the company’s operating income is pinned at $340 million, indicating year-over-year growth of 31%.

The e-commerce boom has been driving the company’s box demand. Packaging Corp’s containerboard mills set record total shipments and all-time record shipments on a daily basis in fourth-quarter 2021. The company is likely to have gained from this momentum in the first quarter as well.  Box shipments per day are expected to be higher on a year-over-year basis, stemming from strong demand and higher domestic and export prices and mix.

The pandemic has affected paper consumption in schools, offices and businesses, straining paper demand. The paper segment has been impacted unfavorably by the dismal paper demand due to the rising preference for electronic data transmission, e-readers and electronic document storage alternatives and the declining North American uncoated freesheet market. These are likely to be reflected in the company’s performance in the quarter to be reported.

The Zacks Consensus Estimate for the Paper segment’s revenues is pegged at $144 million for the March-end quarter, suggesting a year-over-year decline of 13%. The Zacks Consensus Estimate for the segment’s operating income is pinned at $20.33 million, calling for an increase from the prior-year quarter’s $9.8 million. Higher prices and mix from its previously-announced price increase are expected to have benefited the segment’s operating performance in the quarter.

Elevated material costs, higher energy and wood costs along with labor shortages, supply chain challenges and logistics constraints might have dented the company’s margins during the first 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

 

What Our Model Indicates

Our proven model doesn’t conclusively predict an earnings beat for Packaging Corp this season. 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: The Earnings ESP for Packaging Corp is -7.05%.

Zacks Rank: Packaging Corp currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance

In a year’s time, shares of Packaging Corp have gained 14.2% compared with the industry’s growth of 4.3%.

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks Poised to Beat Earnings Estimates

Here are some 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:

Alcoa Corporation (AA - Free Report) currently has an Earnings ESP of +6.67% and a Zacks Rank of 1. The Zacks Consensus Estimate for first-quarter 2022 earnings has moved up 5.4% in the past 30 days to $1.90 per share, suggesting year-over-year growth of 267%.

The Zacks Consensus Estimate for Alcoa’s quarterly revenues is pegged at $3.4 billion, which indicates an increase of 19.8% from the prior-year quarter’s levels.

Deere & Company (DE - Free Report) currently has an Earnings ESP of +2.84% and a Zacks Rank of 2. The Zacks Consensus Estimate for second-quarter fiscal 2022 earnings is currently pegged at $6.68 per share, suggesting 17.6% growth from the year-ago quarter’s tally.

The Zacks Consensus Estimate for quarterly revenues is pinned at $13.5 billion, highlighting year-over-year growth of 22.5%. Deere has a trailing four-quarter earnings surprise of 20.6%, on average. It has a long-term earnings growth of 13.5%.

Illinois Tool Works Inc. (ITW - Free Report) currently has an Earnings ESP of +0.28% and a Zacks Rank #3. The Zacks Consensus Estimate for first-quarter 2022 earnings has gone down 0.9% in the past 30 days and is currently pegged at $2.05 per share. The projection indicates a 2.8% decline from the prior-year quarter’s tally.

The Zacks Consensus Estimate for Illinois Tool’s quarterly revenues is pegged at $3.7 billion, which indicates a year-over-year improvement of 6.3%. ITW has a trailing four-quarter earnings surprise of 3.7%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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