Shareholders might have noticed that Packaging Corporation of America (NYSE:PKG) filed its first-quarter result this time last week. The early response was not positive, with shares down 4.3% to US$171 in the past week. It was a pretty mixed result, with revenues beating expectations to hit US$2.0b. Statutory earnings fell 2.2% short of analyst forecasts, reaching US$1.63 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Packaging Corporation of America's eight analysts are now forecasting revenues of US$8.02b in 2024. This would be an okay 2.7% improvement in revenue compared to the last 12 months. Per-share earnings are expected to rise 2.7% to US$8.26. Before this earnings report, the analysts had been forecasting revenues of US$7.95b and earnings per share (EPS) of US$8.85 in 2024. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at US$175, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Packaging Corporation of America, with the most bullish analyst valuing it at US$197 and the most bearish at US$123 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 3.6% growth on an annualised basis. That is in line with its 4.3% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 2.6% per year. So although Packaging Corporation of America is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Packaging Corporation of America analysts - going out to 2026, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Packaging Corporation of America that you need to take into consideration.
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