Packaging Corp.'s Q3 Earnings Lag Estimates, Rise Y/Y on Higher Prices

Packaging Corporation of America PKG posted adjusted earnings per share of $2.73 in the third quarter of 2025, missing the Zacks Consensus Estimate of $2.83 by 4%.The bottom line, however, increased 3% year over year, supported by higher prices and mix in both the segments, along with lower fiber costs and maintenance outage expense. These gains were partially offset by higher operating costs, lower production volumes, increased depreciation and freight expenses, and a loss recorded for the first month of owning Greif’s GEF containerboard business.Including one-time items, earnings in the reported quarter were $2.51 per share compared with the prior-year quarter’s $2.64. The figure included special items for costs and charges related to the acquisition of Greif’s containerboard business and costs related to closures of corrugated products facilities.Packaging Corporation of America Price, Consensus and EPS Surprise Packaging Corporation of America price-consensus-eps-surprise-chart | Packaging Corporation of America QuotePKG’s Q3 Revenues Rise, Operating Margin Sees Slight UptickSales in the third quarter grew 6% year over year to $2.3 billion. The top line beat the Zacks Consensus Estimate of $2.26 billion.Cost of products sold was up 8% year over year to $1.81 billion in the reported quarter. Gross profit dipped 0.2% year over year to $504 million. The gross margin came in at 21.8% compared with 23.1% a year ago. Selling, general and administrative expenses totaled $154 million compared with the prior-year quarter’s $162 million. Adjusted operating income increased 7% year over year to $351 million. Adjusted operating margin was 15.2% compared with 15% in the year-ago quarter.Packaging Corp.’s Q3 Segment PerformancesPackaging: Sales in this segment increased 6% year over year to $2.13 billion in the third quarter of 2025. The figure beat our estimate of $2.06 billion.In the Packaging segment, total corrugated product shipments for the legacy business were down 1.1% year over year. Including the acquired business, shipments were up 5.3%. We had anticipated a volume decline of 2.5% (excluding the impact of the acquisition) and a favorable price and mix impact of 5.1%.Containerboard production was 1,255,000 tons at the legacy mills and 47,000 tons at the acquired mills. Adjusted operating profit was $348 million compared with $322 million in the prior-year quarter. Our model had estimated the segment’s operating income at $341 million.Paper: The segment’s revenues were $161 million in the quarter, up 1.2% year over year. It beat our estimate of $151 million. The segment reported an adjusted operating profit of $36 million compared with the year-ago quarter’s $39 million. Our projection for the segment’s operating income was $38 million.Segmental sales volume fell 0.7% from third-quarter 2024. We had expected pricing/mix growth of 2.1% for the quarter and volume impact was expected to be a negative 7.5%.PKG’s Cash Flow UpdatesPackaging Corp. had a cash balance of $806.4 million at the end of the third quarter, down from $841 million held at the end of the prior-year quarter.Packaging Corp.’s OutlookPKG projects a fourth-quarter 2025 EPS of $2.40. This suggests a year-over-year decline of 2.8% and a sequential decline of 12%. The company expects higher daily corrugated shipments compared with the third quarter. Export containerboard sales will rise sequentially but will remain below the typical fourth-quarter levels. Containerboard production in the legacy business will dip sequentially due to the maintenance outage at the DeRidder mill. The related maintenance outage will have an impact of 29 cents on earnings. The Packaging segment will see lower prices due to a less favorable seasonal mix. The Paper segment is expected to see lower volumes compared with the seasonally stronger third quarter and flat pricing. Energy and fiber costs will be higher due to seasonality, while freight and other operating costs will likely remain steady. The company expects improved results from the acquired business. This will be tempered by the continued lower production and higher maintenance expenses from the Massillon mill outage that continued into October and seasonally lower volumes and mix in the corrugated business. A full quarter of improved operations at the Riverville mill will offset these impacts.PKG Stock’s Price PerformancePackaging Corp.’s shares have lost 8.3% in the past year compared with the industry’s decline of 34.0%.Image Source: Zacks Investment ResearchPackaging Corp.’s Zacks RankPKG currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Recent Earnings Performance of PKG’s Industry PeerAvery Dennison Corporation AVY reported delivered third-quarter 2025 adjusted earnings of $2.37 per share, beating the Zacks Consensus Estimate of $2.32. The bottom line increased 1.7% year over year, driven by productivity gains.Avery Dennison’s total revenues grew 1.5% year over year to $2.22 billion and beat the consensus estimate of $2.21 billion. Avery Dennison expects adjusted EPS between $2.35 and $2.45 for fourth-quarter 2025.A Quick Look at How Another PKG Peer Will Likely Fare in Q3AptarGroup, Inc. ATR is scheduled to release third-quarter 2025 results on Oct. 30. The Zacks Consensus Estimate for AptarGroup’s third-quarter 2025 earnings is pegged at $5.88 per share, indicating year-over-year growth of 4.3%. The Zacks Consensus Estimate for the company’s top line is pegged at $3.71 billion, indicating growth of 3.6% from the prior-year actual. ATR has a trailing four-quarter average surprise of 8.3%.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. 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(GEF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks