Packaging Corporation of America’s third quarter was met with a negative response from the market, as earnings per share came in meaningfully below Wall Street expectations amid ongoing industry headwinds. Management cited stronger pricing and improved operational efficiency as key supports, but also pointed to soft demand in important corrugated packaging end markets such as beef and building materials. CEO Mark Kowlzan highlighted that these segments have been particularly challenged, noting, “Cattle herds are down to a 70-year low,” which weighed on sales volumes. While the integration of the recently acquired Greif Containerboard business was a major focus, higher operating costs and persistent inflation, especially in energy, continued to pressure margins.
Is now the time to buy PKG? Find out in our full research report (it’s free for active Edge members).
Packaging Corporation of America (PKG) Q3 CY2025 Highlights:
- Revenue: $2.31 billion vs analyst estimates of $2.31 billion (6% year-on-year growth, in line)
- EPS (GAAP): $2.51 vs analyst expectations of $2.84 (11.4% miss)
- Adjusted EBITDA: $503.4 million vs analyst estimates of $506.4 million (21.8% margin, 0.6% miss)
- EPS (GAAP) guidance for Q4 CY2025 is $2.40 at the midpoint, missing analyst estimates by 9.2%
- Operating Margin: 14%, in line with the same quarter last year
- Sales Volumes were flat year on year (15.7% in the same quarter last year)
- Market Capitalization: $18.42 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Packaging Corporation of America’s Q3 Earnings Call
- George Staphos (Bank of America) asked about booking trends and end-market challenges. President Thomas Hassfurther explained that outside of beef and building materials, most segments performed well, but “those two segments have been a drag on us.”
- Michael Roxland (Truist) inquired about synergy targets from the Greif acquisition. CFO Kent Pflederer confirmed the $60 million synergy target, stating, “We’re well on target for that,” and emphasized ongoing operational improvements.
- Gabe Hajde (Wells Fargo) questioned the impact of rising energy costs on the company’s cost structure. CEO Mark Kowlzan responded that energy inflation, especially electricity, is unlikely to abate soon, driving investments in energy independence.
- Mark Weintraub (Seaport Research Partners) sought clarity on capital expenditure requirements for the acquired assets. CEO Mark Kowlzan stated that upgrades would require “tens of millions” over the next couple of years, with no need for major new plant investments.
- Philip Ng (Jefferies) asked about inventory levels and end-market recovery timelines. President Thomas Hassfurther noted that customer inventories are already low and that beef and building materials are expected to remain headwinds in the near term.
Catalysts in Upcoming Quarters
In upcoming quarters, our analysts will be tracking (1) the pace and effectiveness of operational improvements and synergies at the recently acquired Greif facilities, (2) execution of cost control initiatives, especially related to energy and labor inflation, and (3) signs of stabilization or recovery in key end markets such as beef and building materials. Additionally, progress on energy independence projects and the impact of inventory optimization strategies will be important indicators of underlying business momentum.
Packaging Corporation of America currently trades at $206.16, down from $208.74 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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