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Valued at $17.8 billion by market cap, Packaging Corporation of America (PKG), based in Lake Forest, Illinois, operates as a leading producer of containerboard and corrugated packaging. Operating through its Packaging and Paper segments, PKG provides several essential products including shipping containers and protective packaging to industries such as food, beverages, and industrial goods.
Companies worth $10 billion or more are generally described as "large-cap stocks," PKG fits right into that category, with its market cap exceeding the threshold, reflecting its substantial size and influence in the competitive industry of packaging & containers.
Despite its notable strengths, PKG has tanked 20.5% from its all-time high of $250.82 touched on Nov. 25, 2024. Meanwhile, PKG stock has dropped 13.1% over the past three months, underperforming the S&P 500 Index’s ($SPX) 5.4% dip during the same time frame.
Packing Corp. has underperformed the broader market over the longer term as well. PKG has declined 7.1% over the past six months and gained 6.8% over the past 52 weeks, compared to SPX’s marginal 58 bps dip over the past six months and 9.8% returns over the past 52 weeks.
To confirm the recent downturn, PKG has traded mostly below its 50-day moving average since mid-December last year and dropped below its 200-day moving average earlier this month.
Packaging Corp.’s stock prices plunged 9.8% in the trading session after the release of its mixed Q4 results on Jan. 28. Driven by higher volumes and a favorable pricing mix, PKG experienced a notable improvement in realization. Its net sales for the quarter increased 10.7% year-over-year to more than $2.1 billion, exceeding the Street’s expectations. Furthermore, due to a drop in the cost of sales, the company’s gross margins experienced a notable boost. However, it failed to fully translate these gains because of a significant increase in SG&A and other operating expenses, leading to a much more modest improvement in EBITDA margin. Its non-GAAP EBITDA grew 11.6% year-over-year to $439.3 million. Meanwhile, its non-GAAP EPS of $2.47 missed the consensus estimates by 1.6% which unsettled investor confidence.
Nevertheless, Packaging Corp. has notably outperformed its peer Amcor plc’s (AMCR) 15.4% decline over the past six months and 4.5% gains over the past year.
Moreover, analysts remain optimistic about the company’s prospects. Among the eight analysts covering the PKG stock, the consensus rating is a “Strong Buy.” Its mean price target of $248.50 suggests a 24.6% upside potential from current price levels.
