WRK - Packaging Corp. of America leads peers lower after earnings miss

2023-04-25 11:18:10 ET

Packaging Corp. of America ( PKG ) stock plunged over 6% on Tuesday after missing on top and bottom lines for the first quarter of 2023.

The company reported $2.20 in earnings per share for the first quarter, missing estimates by $0.07. Meanwhile, a 7.5% drop in revenue year over year came in $100M lighter than analysts had anticipated. Both the packaging and paper segments missed consensus estimates industry economics continued to shift.

“Consumer spending continues to be negatively impacted by higher interest rates and persistent inflation along with consumer buying preferences skewed more towards services versus durable and non-durable goods,” CEO Mark W. Kowlzan explained. “After a strong start in January, consumer spending was increasingly softer as the quarter progressed, similar to our box shipments during the quarter. In addition, the PMI index indicates manufacturing has remained in contraction territory for the last five months and continued to decline.”

While Kowlzan highlighted efficiency efforts, a price decrease in benchmark containerboard grades hampered results. The paper segment was buoyed somewhat by price increases, by contrast.

“Although there is one less shipping day for the corrugated business, we expect improved volume in our Packaging segment. However, prices will be lower as a result of the previously published domestic containerboard price decreases along with lower export prices,” Kowlzan said. “Sales volume as well as prices and mix in the Paper segment are assumed to be slightly lower based on lower demand.”

The commentary on industry dynamics not only sparked a decline for Packaging Corp. ( PKG ) stock, but rippled across industry peers. Shares of International Paper ( IP ) -4.51% , Westrock Company ( NYSE: WRK ) -3.2% , Avery Dennison ( AVY ) -3.35% , Ranpak Holdings ( PACK ) -5.43% , and Graphic Packaging ( GPK ) -1.1% each stumbled on Tuesday.

Earnings results for Avery Dennison ( AVY ) are expected during Wednesday’s premarket hours while  International Paper is expected to post earnings after the bell on Thursday .

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