Packaging Corporation of America PKG reported adjusted earnings per share (EPS) of $2.47 in the fourth quarter of 2024, which missed the Zacks Consensus Estimate of $2.51 by a margin of 2%. The bottom line matched PKG’s guidance and grew 16% year over year. The upside was driven by higher prices and mix and improved volume in both segments as well as lower freight and logistics expenses. However, these gains were somewhat offset by an increase in operating costs, scheduled maintenance outage expenses, depreciation expenses and other expenses.
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Including special items for closure and other costs related to corrugated products facilities, earnings in the quarter were $2.45 per share compared with the prior-year quarter’s $2.10.
Packaging Corporation of America Price, Consensus and EPS Surprise
Packaging Corporation of America price-consensus-eps-surprise-chart | Packaging Corporation of America Quote
Packaging Corp.’s Sales & Margins Improve Y/Y in Q4
Sales in the fourth quarter rose 10.7% year over year to $2.15 billion due to higher volumes and price/mix in both segments. The top line beat the Zacks Consensus Estimate of $2.13 billion.
The cost of products sold rose 9.7% year over year to $1.68 billion. Gross profit grew 14.5% year over year to $469.7 million. Selling, general and administrative expenses totaled $147 million compared with the prior-year quarter’s $143 million.
Packaging Corp. reported an adjusted operating income of $303.9 million, which marked a 14.5% year-over-year increase from $265.3 million in the fourth quarter of 2023.
PKG’s Q4 Segmental Performances
Packaging: Sales in this segment increased 11.2% year over year to $1.98 billion on improved volumes and price/mix. The figure surpassed our estimate of $1.94 billion.
Total corrugated product shipments grew 9.1% year over year. Containerboard production was 1,310,000 tons and containerboard inventory was up 54,000 tons compared with the year-ago quarter.
The corrugated products plants delivered record fourth-quarter total shipments and all-time record shipments per day.
We anticipated volume growth of 13.4% and an unfavorable price and mix impact of 4.3%.
Adjusted operating profit was $299 million compared with $265 million in the prior-year quarter. Our model had projected the segment’s adjusted operating income to be $329 million.
Paper: The segment’s revenues were $151.5 million in the October-December quarter, up 5% year over year as sales volumes and price/mix improved year over year. The metric was higher than our estimate of $146 million. The segment reported an adjusted operating profit of $35 million compared with the year-ago quarter’s $31 million. Our projection for the segment’s adjusted operating income was $38 million.
Sales volume rose 5% from the fourth quarter of 2023. We had expected a negative pricing/mix impact of 1.9% while volume was expected to be a positive 3.2%.
PKG’s Fiscal 2024 Performance
PKG’s adjusted EPS for 2024 was $9.04, which fell short of the Zacks Consensus Estimate of $9.08. Including one-time items, EPS was $8.93 compared with $8.48 in 2023.
Sales for the full year were $8.38 million, which reflected a 7% year-over-year increase. The top line beat the consensus estimate of $8.37 billion.
Packaging Corp.’s Cash Flow Updates
The company ended 2024 with a cash balance of $0.85 billion compared with $1.2 billion at the end of 2023.
PKG’s Q1 Outlook
Packaging Corp. projects first-quarter 2025 EPS of $2.21. Compared with the EPS of $1.72 in the first quarter of 2024, this indicates growth of 28.5%
For the Packaging segment, volumes in the corrugated products plants are expected to reach record levels for total shipments and shipments per day. However, containerboard volume will be lower due to two fewer operating days and scheduled maintenance outages at Counce, TN and Valdosta, GA mills. Domestic prices will be higher with an improved product mix together with PKG’s previously announced price increases. Export prices are expected to be stable.
For the Paper segment, the company anticipates a slightly lower volume with two fewer mill operating days. Prices and mix will be fairly flat.
Barring recycled fiber prices, Packaging Corp. expects price inflation across most direct, indirect and fixed operating and converting costs along with a higher cost mix of mill operations. Wood, energy and chemical costs will also spike due to the unusually cold seasonal weather. Labor and benefits costs will also increase owing to timing-related items such as annual increases, the restart of payroll taxes and share-based compensation expenses.
Additionally, first-quarter rail rate increases at three of its mills will impact freight and logistics expenses and PKG also expects higher depreciation expenses. Scheduled outage expenses are expected to be slightly lower and a decreased corporate tax rate will provide some respite.
Packaging Corp.’s Stock Price Performance
PKG shares have gained 41% in the past 12 months compared with the industry’s 12.7% growth.
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PKG’s Zacks Rank
Packaging Corp. currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Another Packaging Stock in Q4
Silgan Holdings SLGN reported a record fourth-quarter adjusted EPS of 85 cents , which beat the Zacks Consensus Estimate of 82 cents . This marked a 35% increase from earnings of 63 cents per share a year ago.
Silgan’s fourth-quarter revenues rose 5% year over year to $1.41 billion, surpassing the Zacks Consensus of $1.39 billion. The improvement was attributed to the contribution from the acquisition of Weener Packaging in the Dispensing and Specialty Closures segment, partially offset by a less favorable mix in the Metal Containers segment.
SLGN projects adjusted EPS to be in the band of $4.00-$4.20 for 2025. This indicates a 13% increase at the midpoint compared with 2024.
Packaging Stocks Awaiting Results
AptarGroup, Inc. ATR is scheduled to release its fourth-quarter 2024 results on Feb. 2. The Zacks Consensus Estimate for ATR’s fourth-quarter 2024 earnings is pegged at $1.26 per share, indicating year-over-year growth of 4%.
The consensus estimate for AptarGroup’s top line is pegged at $858.7 million, indicating an increase of 2.4% from the prior year’s actual. ATR has a trailing four-quarter average earnings surprise of 6.1%.
Sonoco SON, scheduled to release fourth-quarter 2024 results on Feb. 2, has a trailing four-quarter average surprise of 1.02%. The Zacks Consensus Estimate for SON’s fourth-quarter 2024 earnings is pegged at $1.18 per share, implying year-over-year growth of 15.7%.
The consensus estimate for the company’s top line is pegged at $1.67 billion, indicating a rise of 1.9% from the prior-year figure.
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