Packaging Corp. of America shares tumble after earnings miss

[Boxes On Conveyor Belt]
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Packaging Corporation of America’s (NYSE:PKG [https://seekingalpha.com/symbol/PKG]) stock plunged 7.5% in extended trading Wednesday after the company reported [https://seekingalpha.com/news/4507211-packaging-non-gaap-eps-of-2_73-misses-by-0_09-revenue-of-2_31b-in-line] third-quarter earnings that fell short of Wall Street expectations, while revenue came in line with estimates.

On an adjusted basis, excluding special items related to its acquisition of Greif’s containerboard business and facility closures, the company earned $2.73 a share, slightly above the prior-year adjusted earnings of $2.65 a share but below analysts’ expectations of $2.82 a share.

Revenue rose to $2.31 billion from $2.20 billion a year earlier, effectively matching analysts’ forecast of $2.31 billion.

The Lake Forest, Ill.-based packaging and paper producer said net income for the third quarter was $226.9 million, or $2.51 per share, compared with $238.7 million, or $2.64 per share, in the year-ago quarter. Wall Street had projected GAAP earnings of $2.84 a share.

Chief Executive Mark Kowlzan in a statement said the company’s legacy packaging business performed strongly during the quarter, but results were dampened by the first month of integration costs and downtime at recently acquired Greif mills.

“We took extended outages at both acquired mills to perform extensive maintenance and improve future operations,” Kowlzan said. “While these activities significantly impacted results in September, we are already seeing the benefits of improved performance.”

Excluding the effect of the Greif acquisition and special items, earnings came in $0.04 above PCA’s third-quarter guidance of $2.80 per share, the company said, citing favorable pricing and lower freight costs.

PCA’s packaging segment operating income excluding special items rose to $347.9 million, up from $321.6 million in the prior-year period, driven by higher prices and a better product mix.

Corrugated products shipments from PCA’s legacy business were down 2.7% a day but up 1.1% overall thanks to one extra shipping day in the quarter; including the newly acquired operations, shipments rose 5.3% in total.

Looking ahead, PCA projected fourth-quarter earnings of $2.40 a share, excluding special items, and said it expects higher corrugated shipments but lower containerboard production due to maintenance outages and seasonal factors. Analysts on average expect adjusted earnings of $2.60 a share for the final quarter of the year.

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