Benzinga - by Zacks, Benzinga Contributor.
Packaging Corporation of America's (NYSE: PKG) shares have gained 49.3% over the past year. The company has outperformed its industry's growth of 14.5% and the S&P 500's 28.5% rise over the same period.
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Let us take a look into the factors behind this Zacks Rank #2 (Buy) company's price appreciation.
Solid E-Commerce Demand: Packaging Corp has been benefitting from strong growth in e-commerce activities that continue to support packaging demand. The Packaging segment accounts for around 91% of the company's revenues.
Packaging products are essential for distributing food, beverage and pharmaceutical products. The Packaging segment will continue to reflect stable packaging demand for meat, fruit and vegetables, processed food, beverages, medicine, and other consumer products.
Improvement in Order Levels: In the first quarter of 2024, the outside sales volume of containerboard increased 40,000 tons from the first quarter of 2023. The company's order backlog and containerboard sales were strong in the quarter.
The company expects total corrugated product shipments to be higher in 2024 for the packaging segment, reflecting the ongoing robust demand. In the Paper segment, the company expects an improved mix to move prices slightly higher. These tailwinds are expected to boost its performance in the upcoming quarters.
Strategic Actions: Packaging Corp's Jackson, AL-based mill historically operated as an uncoated freesheet ("UFS") paper mill. In the fourth quarter of 2020, to meet strong packaging demand and maintain appropriate inventory levels, the company temporarily began producing liner boards on the No. 3 machine at the mill.
In February 2021, PKG announced the discontinuation of UFS paper grades on the machine and the permanent conversion of the machine to produce liner boards. Packaging Corp began producing corrugating medium on the No. 1 machine at the Jackson mill in the third quarter of 2021. This will help meet customers' strong demand for containerboards and help build targeted inventory levels.
In December 2021, the company acquired all assets of Advanced Packaging Corporation in a cash-free transaction. PKG acquired a full-line 500,000-square-foot corrugated products facility located in Grand Rapids, MI. The deal supported Packaging Corp's focus on enhancing its containerboard portfolio through organic box volume growth and strategic box plant acquisitions.
Following the buyout, PKG's containerboard integration increased almost 80,000 tons. This enhanced its mill capacity and box plant operations.
Other Key Picks Some other top-ranked stocks from the Industrial Products sector are Intellicheck, Inc. (NASDAQ: IDN), Applied Industrial Technologies (NYSE: AIT) and Cintas Corporation (NASDAQ: CTAS). IDN currently sports a Zacks Rank #1 (Strong Buy), and AIT and CTAS carry a Zacks Rank #2.
The Zacks Consensus Estimate for Intellicheck's 2024 earnings is pegged at 2 cents per share. The consensus estimate for 2024 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 28.9%. IDN shares have gained 84.2% in a year.
Applied Industrial has an average trailing four-quarter earnings surprise of 8.2%. The Zacks Consensus Estimate for AIT's 2024 earnings is pinned at $9.62 per share, which indicates year-over-year growth of 9.9%. Estimates have moved north by 2% in the past 60 days. The company's shares have gained 8.8% in a year.
The Zacks Consensus Estimate for Cintas's 2024 earnings is pegged at $14.95 per share. The consensus estimate for 2024 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 4.3%. CTAS shares have gained 13.7% in a year.
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