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Packaging Corporation Hits 52-Week High: What's Driving It?

ByZacks Investment Research
Published 12/06/2016, 04:43 AM
Updated 07/09/2023, 06:31 AM

Shares of containerboard and packaging products manufacturer Packaging Corporation of America (NYSE:PKG) scaled a new 52-week high of $88.29 on Dec 5, before ending the day at $87.15. The shares touched a new high following the completion of its recent acquisition of Columbus Container.

This Lake Forest, IL-based company has a market cap of $8.14 billion. Meanwhile, average volume of shares traded in the last three months is approximately 857K. Packaging Corporation has delivered a year-to-date return of 38.1%. The company has delivered an average positive surprise of 4.98% in the last four quarters.

Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock has the fundamentals to scale higher. The stock is currently trading at a forward P/E of 18.0x and has a long-term earnings growth expectation of 11.48%.

Growth Drivers

The Columbus Container buyout is a strategic fit for Packaging Corporation and is expected to be immediately accretive to earnings. The acquisition is anticipated to increase containerboard production by over 30,000 tons.

In August, Packaging Corporation made a similar deal with the purchase of all of the assets of TimBar Corporation, a large independent corrugated products manufacturer, for $386 million in cash. These strategic acquisitions exhibit that the company is focused on increasing its vertical integration of containerboard to above 90%. The company expects both the strategic acquisitions to increase its containerboard integration and allow further optimization along with enhancement of its mill capacity.

PACKAGING CORP Price and Consensus

PACKAGING CORP Price and Consensus | PACKAGING CORP Quote

Packaging Corporation is the fourth largest containerboard and corrugated products manufacturer in the U.S. Its offerings include a diversified range of corrugated products such as shipping containers, point-of-sale graphics packaging, point-of-purchase displays and other specialized packaging. An enormous scale of production and an extended product portfolio offer a competitive advantage to the company to fulfill the varied demands of its diversified clientele.

The company’s corrugated product manufacturing plants produce a wide variety of packaging items, including conventional shipping containers used to protect and transport manufactured goods. Further, it produces multi-colored boxes and displays with strong visual appeal that aid merchandise across retail locations.

Additionally, Packaging Corp. is a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. The diverse product portfolio mitigates operational risks associated with any downturn in a particular product category.

Stocks to Consider

Some better-ranked stocks in the same sector include ACCO Brands Corp. (NYSE:ACCO) , Deere & Co. (NYSE:DE) and EnerSys (NYSE:ENS) .

ACCO Brands has an impressive track record of earnings surprise with an average positive earnings surprise of 23.93% in the last four quarters and the stock has gained 76.72% year to date. ACCO Brands sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere, which also carries a Zacks Rank #1 has gained 33.08% year to date. The company has an average positive earnings surprise of 58.17% in the last four quarters. EnerSys another Zacks Rank #1 stock has delivered a positive average earnings surprise of 3.01% in the last four quarters. The stock has gained 38.78% year to date.

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PACKAGING CORP (PKG): Free Stock Analysis Report

DEERE & CO (DE): Free Stock Analysis Report

ENERSYS INC (ENS): Free Stock Analysis Report

ACCO BRANDS CP (ACCO): Free Stock Analysis Report

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