2024-07-25 17:35:21 ET
Summary
- Packaging Corporation of America saw positive topline growth in the first two quarters of 2024 despite weak pricing and mix.
- The company's margin is under pressure due to an expected increase in operational costs in the near term.
- Despite near-term challenges, the company's focus on capacity expansion and backlog strength support longer-term growth prospects.
- The stock valuation is currently at a premium to its historical averages, suggesting a Hold rating considering the weak near-term prospects.
The Thesis
Packaging Corporation of America ( PKG ) delivered positive topline growth in the first two quarters of 2024 after experiencing a decline throughout 2023, as volume was strong for the company's containerboard and corrugated products during the quarter despite weak year-on-year average pricing and mix. I expect this strong demand along with strength in the company's backlog should support the company's topline in 2024 despite sustained weakness in certain parts of the company's business due to headwinds from the challenging macroeconomic environment across North America....
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Packaging Corporation Of America: Weak Growth Prospects In The Near Term And A Premium Valuation