Deutsche Bank Upgrades Packaging Corporation of America to a ‘Buy’

Packaging Corporation of America (PKG) has a market cap of $7.8 billion. It rose 2.1% to close at $82.29 per share on September 23, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.8%, 9.1%, and 34.0%, respectively, on the same day. PKG is trading 3.6% above its 20-day moving average, 7.6% above its 50-day moving average, and 29.2% above its 200-day moving average.

The iShares Global Timber & Forestry ETF (WOOD) invests 3.8% of its holdings in PKG. The ETF tracks the 25 largest publicly listed companies that own or manage forests and timberlands. The YTD price movement of WOOD was 5.8% on September 23.

The market caps of PKG’s competitors are as follows:

• International Paper (IP) — $19.9 billion
• WestRock (WRK) — $12.2 billion
• Domtar (UFS) — $2.3 billion

Deutsche Bank has upgraded Packaging Corporation of America’s rating to a “buy” from “hold.” It also increased the stock’s price target to $90 from $77 per share.

On September 22, 2016, Goldman Sachs initiated the coverage of Packaging Corporation of America’s rating to “sell” and set the stock’s price target at $77 per share.

Packaging Corporation of America (PKG) reported 2Q16 net sales of ~$1.4 billion, a fall of 2.5% from the net sales of ~$1.5 billion in 2Q15. Sales of its Packaging and Paper segments fell 1.5% and 5.1%, respectively, between 2Q15 and 2Q16. The company’s gross profit margin and income from operations rose 3.4% and 1.3%, respectively.

Its net income and EPS (earnings per share) rose to $115.9 million and $1.23, respectively, in 2Q16, compared with $114.0 million and $1.16 in 2Q15. It reported EBITDA (earnings before interest, tax, depreciation, and amortization) excluding special items of $290.4 million in 2Q16, a rise of 1.1% from 2Q15.

PKG’s capital spending fell 20.2% and its cash balance rose 30.5% between 2Q15 and 2Q16. Next, we’ll look at ConAgra Foods (CAG).