Shares of Packaging Corporation (PKG) hit a 52-week high of $73.31 during yesterday’s trading session. However, the stock closed a notch lower at $72.56, which reflects a solid yearly return of 80.3%. The average trading volume aggregated 1.2 million shares.
This Zacks Rank #1 (Strong Buy) stock is likely to continue this momentum as it currently trades at a forward P/E of 16.27x and has a long-term earnings growth expectation of 19.3%.
Growth Drivers
Improved prices, strong corrugated products volume, and productive and efficient mill operations are the primary driving factors for Packaging Corporation.
On Feb 11, 2014, Packaging Corporation reported net income of $227.0 million or $2.33 per share for the fourth quarter of 2013 compared with $61.0 million or 63 cents per share in the year-ago quarter. The improvement in earnings was driven by acquisition of Boise, Inc.
Pricing for domestic containerboard and boxes remained very steady during the quarter. The corrugated products shipments were up 4.4% year over year and were up 24.0% including Boise’s partial quarter shipments. White papers, volume was up about 1% year over year driven by growth in office papers, which offset declines in printing and converting, and pressure-sensitive papers.
Packaging Corporation is concentrating on strengthening its business through acquisition of complementary companies. Additionally, Packaging Corporation is on a look-out for more potential acquisitions with an aim to improve its long-term growth potential.
Packaging Corporation is the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated freesheet paper in North America. The company’s strong leadership position bodes well in the long term.
Estimate Revisions
Over the last 30 days, Packaging Corporation’s earnings estimates for fiscal 2014 climbed higher on expectations of a solid earnings momentum. We also envision an uptrend for the stock backed by its strong growth potential.
Other Stocks to Consider
Other stocks that look promising and are worth a look now include Clearwater Paper Corp. (CLW), Domtar Corp. (UFS) and Fibria Celulose SA. (FBR), each having a Zacks Rank #2 (Buy).
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