Shares of Packaging Corporation of America (PKG) hit a 52-week high of $82.10 on Jan 21, 2015, before closing the trading session slightly lower at $81.88. Packaging Corporation’s share price has been steadily climbing up since mid October.
Despite its strong price appreciation, this Zacks Rank #2 (Buy) stock still has enough fundamentals that may further drive the stock upward. Investors remain upbeat as the company continues to ramp up production and lowers operating costs.
Growth Drivers
Packaging Corporation is the fourth largest producer of containerboard and corrugated packaging products in the U.S. and the third largest producer of uncoated freesheet paper in North America. Since its inception in 1867, the company has expanded its operations across the length and breadth of the country and currently operates 120 facilities — including five containerboard mills, one containerboard machine at WA and 100 manufacturing locations.
The company has been on a roll with eight consecutive quarters of record earnings driven by strong sales volume, record mill productivity, and mill cost reductions. In addition, the integration of Boise with the fabric of the company has resulted in synergies and operational improvements have led to significantly lower costs and higher margins.
We remain impressed with the company’s operational efficiency and sustainable revenue stream. Packaging Corporation has benefited considerably from the expansion of its converting business. The company is now achieving better-than-expected gains from its energy projects. Additionally, the company’s systematic dividend payment and its share repurchase initiatives would surely be more accretive to its results moving ahead.
Packaging Corporation also maintains a sound and flexible balance sheet with ample liquidity that enables it to capitalize on potential business deals to fuel top-line growth. We believe that its robust operating platform and an efficient management team will further help in the execution of the company’s strategic priorities and drive net asset value and dividend growth in the future as well.
Other Stocks to Consider
Other stocks in the industry that warrant a look include AptarGroup, Inc. (ATR), Bemis Company, Inc. (BMS) and UFP Technologies, Inc. (UFPT), each carrying a Zacks Rank #2 (Buy).
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