Jefferies analyst Philip Ng has revised his rating for Packaging Corp. (PKG, Financial), shifting it from Buy to Hold. The price target has also been adjusted to $205 from a previous $245. Although Ng continues to regard Packaging Corp. as a leader in its field, he notes that the company's competitive advantage is diminishing. Moreover, the stock's premium valuation is perceived as a limiting factor. Jefferies has identified more potential for growth in shares of Smurfit Westrock, which received an upgrade to Buy earlier today.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 9 analysts, the average target price for Packaging Corp of America (PKG, Financial) is $207.39 with a high estimate of $245.00 and a low estimate of $148.50. The average target implies an upside of 9.99% from the current price of $188.56. More detailed estimate data can be found on the Packaging Corp of America (PKG) Forecast page.
Based on the consensus recommendation from 11 brokerage firms, Packaging Corp of America's (PKG, Financial) average brokerage recommendation is currently 2.4, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Packaging Corp of America (PKG, Financial) in one year is $182.57, suggesting a downside of 3.18% from the current price of $188.56. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Packaging Corp of America (PKG) Summary page.
PKG Key Business Developments
Release Date: April 23, 2025
- Net Income: $204 million or $2.26 per share; excluding special items, $208 million or $2.31 per share.
- Net Sales: $2.1 billion in Q1 2025, up from $2 billion in Q1 2024.
- EBITDA (Excluding Special Items): $421 million in Q1 2025, up from $333 million in Q1 2024.
- Packaging Segment EBITDA Margin: 21% in Q1 2025, up from 18% in Q1 2024.
- Paper Segment EBITDA Margin: 26% in Q1 2025, up from 25% in Q1 2024.
- Cash Provided by Operations: $339 million, a first-quarter record.
- Free Cash Flow: $191 million, a first-quarter record.
- Capital Expenditures: $148 million.
- Dividend Payments: $112 million.
- Quarter-End Cash Balance: $914 million.
- Liquidity: Just over $1.2 billion.
- Corrugated Products Volume Growth: Up 2.5% versus Q1 2024.
- Containerboard Production: Record production volume.
- New Box Plant: Startup in Glendale, Arizona, increasing box capacity by almost 2 billion square feet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Packaging Corp of America (PKG, Financial) reported a significant increase in first-quarter net income, reaching $208 million or $2.31 per share, compared to $155 million or $1.72 per share in the first quarter of 2024.
- The company achieved a record EBITDA margin of 21% in the Packaging segment, driven by effective price increase implementation and strong operational performance.
- PKG successfully started up a new state-of-the-art box plant in Glendale, Arizona, ahead of schedule and below budget, which is expected to significantly increase productivity and capacity.
- Cash provided by operations set a first-quarter record at $339 million, with free cash flow also reaching a record $191 million.
- The company maintained a strong balance sheet with a quarter-end cash balance of $914 million and liquidity of over $1.2 billion.
Negative Points
- PKG continues to face inflationary pressures across most of its cost structure, despite lower fiber prices during the quarter.
- The Paper segment experienced a 7% decline in sales volume compared to a strong first quarter of 2024, reflecting current economic uncertainty.
- Higher interest expenses and a higher tax rate negatively impacted earnings by $0.03 and $0.04 per share, respectively.
- The company anticipates increased operating costs in the second quarter due to adjustments in the planned maintenance outage schedule, resulting in a $0.16 per share increase in outage costs.
- Economic uncertainty and trade tensions are expected to continue weighing on demand, potentially impacting volume and costs.
