As the world increasingly shifts away from single-use plastics, the demand for sustainable packaging solutions is rising fast. Consumers and businesses are now more conscious than ever about the environmental impact of their choices, leading to a growing emphasis on eco-friendly packaging alternatives.
Given this backdrop, it could be wise to consider investing in three fundamentally sound sustainable packaging stocks such as Packaging Corporation of America (PKG), Crown Holdings, Inc. (CCK), and Sonoco Products Company (SON).
With visions of sea turtles tangled in plastic and whales suffering from ingested waste, it’s no surprise that consumers are increasingly turning away from traditional plastics. Their attention has shifted toward more sustainable, environmentally friendly packaging solutions, including biodegradable materials, recyclable packaging, and minimalistic designs that reduce waste.
This shift is driving the rapid growth of sustainable packaging, with many companies committing to 100% recycled materials in the coming years. Moreover, consumers are increasingly willing to pay a premium for products with sustainable packaging, with nearly 70% stating they'd spend more on such options.
This rising demand presents a promising opportunity for companies prioritizing sustainable packaging to capture a larger market share. The global sustainable packaging market size is forecasted to nearly double, reaching $490.73 billion by 2032, growing at a CAGR of 6.6% from 2023 to 2032.
Considering these factors, let's evaluate the Industrial – Packaging stocks in detail, starting with the third choice:
Stock #3: Crown Holdings, Inc. (CCK)
CCK operates globally in the packaging industry through four segments: Americas Beverage; European Beverage; Asia Pacific; and Transit Packaging. The company produces and sells recyclable aluminum beverage cans and ends, aerosol cans, glass bottles, steel crowns, and closures.
On July 29, 2024, CCK announced that its Board of Directors approved a stock repurchase program of up to $2.0 billion, set to run through the end of 2027.
The management views this buyback as a key component of their longer-term capital allocation strategy, which focuses on investing in growth, returning capital to shareholders, and reducing debt. The goal is to lower the company’s net leverage to 2.5 times.
Buoyed by its strong financial performance, the company declared a quarterly dividend of $0.25 per share, payable to its shareholders on August 29, 2024. CCK pays an annual dividend of $1, which translates to a yield of 1.14% at the current share price. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 34.8% over the past three years.
CCK’s net sales for the fiscal second quarter that ended June 30, 2024, amounted to $3.04 billion, while its income from operations stood at $379 million, up 3.3% over the prior-year quarter. The company’s adjusted net income and earnings per share increased by 8% and 7.7% year-over-year to $217 million and $1.81, respectively.
Street expects CCK’s revenue for the third quarter (ending September 2024) to increase marginally year-over-year to $3.08 billion. Its EPS for the third quarter is expected to grow by 4.4% from the previous year, settling at $1.81.
The stock has gained 17.4% over the past month to close the last trading session at $87.36.
CCK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CCK has a B grade for Growth, Momentum, and Sentiment. It is ranked #6 out of 19 stocks in the B-rated Industrial – Packaging industry. Click here to access the other CCK ratings for Value, Stability, and Quality.
Stock #2: Packaging Corporation of America (PKG)
With a market cap of $17.72 billion, PKG manufactures and sells containerboard and corrugated packaging products in the United States. The company operates through three segments: Packaging; Paper; and Corporate and Other.
On June 15, the company paid its shareholders a quarterly dividend of $1.25 per share. With 13 years of consecutive dividend growth, PKG pays an annual dividend of $5, which translates to a yield of 2.53% at the current share price. Moreover, the company’s dividend payouts have increased at a CAGR of 9.6% over the past five years.
For the second quarter of 2024, which ended on June 30, PKG's net sales increased 6.3% year-over-year to $2.08 billion, while its income from operations amounted to $276 million. The company’s non-GAAP net income and EPS for the quarter stood at $198.60 million and $2.20, respectively. Also, its cash, cash equivalents, and market debt securities grew 86.3 % from the year-ago value to $1.17 billion.
The consensus revenue estimate of $2.10 billion for the fiscal third quarter (ending September 2024) represents an 8.5% increase year-over-year. The consensus EPS estimate of $2.48 for the ongoing quarter indicates a 20.8% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
PKG shares have surged 30.4% over the past nine months and 21.4% year-to-date to close the last trading session at $197.74.
PKG’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Momentum and Stability. Within the same industry, PKG is ranked #5. Click here to see the additional ratings for PKG (Growth, Value, and Sentiment).
Stock #1: Sonoco Products Company (SON)
SON designs, develops, manufactures, and sells various engineered and sustainable packaging products across North and South America, Europe, Australia, and Asia. With a market cap of $5.22 billion, the company operates through two segments: Consumer Packaging and Industrial Paper Packaging.
On July 17, the company declared a quarterly common stock dividend of $0.52 per share, payable on September 10, 2024, to shareholders of record as of August 9, 2024.
SON’s annual dividend of $2.08 translates to a 3.91% yield on the prevailing prices, while its four-year average dividend yield is 3.20%. Its dividend payouts have grown at CAGRs of 5.2% and 4.3% over the past three and five years, respectively. Also, SON has a record of 41 years of consecutive dividend growth.
On June 24, SON agreed to acquire Eviosys, Europe’s leading food cans, ends, and closures manufacturer, for approximately $3.9 billion. This acquisition aligns with the company's strategy to focus on and scale its core businesses and invest in high-return opportunities.
With this move, SON will become the global leader in metal food can and aerosol packaging manufacturing. Additionally, the company expects to achieve over $100 million in synergies from the integration of Eviosys with its existing metal can business.
For the fiscal first quarter that ended March 31, 2024, SON’s net sales amounted to $1.64 billion, while its gross profit stood at $337.55 million. Its adjusted attributable net income and earnings per share for the quarter amounted to $111.49 million and $1.12, respectively.
The company’s net cash from operating activities increased 69.6% year-over-year to $166.24 million. As of March 31, 2024, its cash and cash equivalents increased to $172.21 million from $151.94 million recorded as of December 31, 2023.
Analysts expect SON’s revenue and EPS for the third quarter (ending September 2024) to increase marginally year-over-year to $1.74 billion and $1.46, respectively. Over the past nine months, the stock has gained 3.7%, closing the last trading session at $53.19.
It’s no surprise that SON has an overall rating of B, equating to a Buy in our POWR Ratings system. It also has a B grade for Value, Momentum, and Stability. It is ranked #3 out of 19 stocks in the same B-rated industry.
Beyond what is stated above, we’ve also rated SON for Growth, Sentiment, and Quality. Get all SON ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
PKG shares were trading at $199.00 per share on Wednesday morning, up $1.26 (+0.64%). Year-to-date, PKG has gained 23.82%, versus a 16.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Sustainable Packaging Stocks to Buy StockNews.com
