Packaging Corporation of America (PKG) reported net income from continuing operations (excluding post-tax debt refinancing charges) of $48 million or 49 cents per share in the second quarter of 2012 compared to a net income of $41 million or 42 cents per share in the first quarter of 2012, and a net income of $40 million or 39 cents per share in the year-earlier quarter.
The record earnings were primarily attributable to increased sales volume of containerboards and corrugated products during the quarter. Additionally, the company also benefited from minimized production costs. The company’s earnings surpassed management’s expectations and also the Zacks Consensus Estimate of 45 cents per share for the quarter.
GAAP EPS reported by the company was 46 cents per share compared to 39 cents per share in the previous year quarter and 18 cents per share in the last quarter.
Revenues
Net sales came to $712 million, up 7% year over year and 6.1% sequentially, comprehensively beating the Zacks Consensus Estimate of $690 million.
Corrugated products’ shipments surged 6.6% year over year. Outside sales of containerboards declined from the year-earlier quarter. The production of Containerboard jumped 5.3% year over year to 638,000 tons. At the end of the current quarter the company’s containerboard inventories were approximately 1,000 tons which was lower than the first quarter of 2012.
Margins
Gross profit in the quarter was $158.1 million, up 15.5% from the year-ago quarter. Gross margin came in at 22.2% in the second quarter of 2012 versus 20.6% in the year-ago quarter and 21.6% in the previous quarter. Selling and administrative expenses amounted to $52.9 million compared with $48.2 million in the previous year quarter.
Management stated that the high corrugated product shipments, improved mill operations and reduced expenses boosted the company’s performance in the quarter. Moreover, the quarter saw a rise in the export prices compared with the previous quarter.
Outlook
The company anticipates that the sales accruing from corrugated products would be enhanced in the coming quarter. In addition, the production of the mill is likely to improve with reduced cost of production. Including these factors, management expects that the earnings per share for the third quarter of 2012 will be 54 cents. The guidance excludes the charge accruing from note redemption.
Our Recommendation
Packaging Corporation currently has a Zacks Rank# 4 which implies a short-term (1-3 months) ‘Sell’ rating on the stock.
PACKAGING CORP (PKG): Free Stock Analysis Report
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