Shares of Packaging Corporation of America (PKG) are nearing its 52-week high as the third-quarter earnings release approaches. The manufacturer of containerboard and corrugated products has beaten the Zacks Consensus Estimate for the past five quarters. This Zacks #2 Rank (Buy) has also been consistently distributing dividends, and currently has a solid 3.0% yield.
Promising Outlook for Q3
Packaging Corporation of America is scheduled to report its third-quarter results on October 15. In its second quarter report from July 16, management projected earnings per share to be roughly 52 cents in the quarter, based on the expectations of higher seasonal volumes, mill production and lower mill costs.
In that second quarter, Packaging Corporation of America reported adjusted earnings per share of 49 cents, up 26% year over year and 6.5% above the Zacks Consensus Estimate of 46 cents. This marked the fifth straight quarter with a positive earnings surprise.
Net revenues increased 7.0% year over year to $712.5 million. Shipments of corrugated products were up 6.6%, including a 3.6% increase from box plant acquisitions.
Earnings Estimates Move Higher
Over the past two months, the Zacks Consensus Estimate for 2012 has advanced 3.6% to $2.02, including an increase of 2% in just the past seven days. Meanwhile the Zacks Consensus Estimate for 2013 is up 7.8% in 60 days to $2.48 per share, which also suggests year-over-year improvement of nearly 23%.
As for the soon-to-be-announced third quarter, the Zacks Consensus Estimate is currently at 56 cents per share, which is up 3.7% in 2 months.
Dividend
Regular dividend payments and increases at intervals have been one of the company’s most attractive features. The 5-Year average dividend yield for Packaging Corporation of America stands at 4.3%, while the stock currently yields a solid 3.0% based on an annual dividend rate of $1.00 per share.
Valuation
Packaging Corporation of America is currently trading at a forward P/E of 17.6x compared with 16.3x for the peer group. The company’s PEG ratio is at 1.83. ROE stands at 18.2% compared with the peer group average of 13.2%.
As can be observed from the Price & Consensus chart below, the company reached a new peak in mid 2011. Prospects appear bright as Zacks Consensus Estimates are trending higher for future years.
Solid second-quarter 2012 results and a promising outlook make Packaging Corporation of America an attractive investment option.
Headquartered in Lake Forest, Illinois, Packaging Corporation of America was incorporated in 1867. The $3.35 billion company operates in the Packaging and Containers industry and manufactures and sells containerboard and corrugated products in the United States.
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