February 28, 2016
NYSE: PKG
PACKAGING CORP OF AMERICA
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
$2.20
B-
C+
C
Annual Dividend Yield
4.63%
SELL
C-
STOCK PERFORMANCE (%)
3 Mo.
Price Change
-29.60
D
Beta
1.51
Sector: Materials
PKG BUSINESS DESCRIPTION
Packaging Corporation of America manufactures
and sells containerboard and corrugated
packaging products in the United States, Europe,
Mexico, and Canada.
D+
D-
E+
E
E-
F
Market Capitalization
$4.6 Billion
Sub-Industry: Paper Packaging
Weekly Price: (US$)
SMA (50)
BUY
52-Week Range
$44.32-$84.30
Revenues
Net Income
EPS
RETURN ON EQUITY (%)
PKG
Q4 2015
NA
Q4 2014
25.80
Q4 2013
33.60
09/01/2009
$54.82
Price as of 2/25/2016
$47.46
Source: S&P
SMA (100)
1 Year
2 Years
85
80
75
70
1 Yr.
-42.20
3 Yr (Ann)
4.91
12 Mo.
-1.90
11.25
11.77
3 Yr CAGR
26.39
38.67
38.46
65
60
GROWTH (%)
Last Qtr
-3.01
5.77
7.00
RATING SINCE
TARGET PRICE
TARGET
TARGET
TARGETPRICE
PRICE
PRICE$54.82
$54.82
$54.82
TARGET
55
50
45
Rating History
BUY
Ind Avg
40.45
42.19
595.21
S&P 500
12.28
14.59
13.97
Volume in Millions
20
10
2014
2015
2016
0
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
P/E COMPARISON
RECOMMENDATION
We rate PACKAGING CORP OF AMERICA (PKG) a BUY. This is driven by a few notable strengths, which we
believe should have a greater impact than any weaknesses, and should give investors a better performance
opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its
increase in net income and growth in earnings per share. We feel its strengths outweigh the fact that the
company shows low profit margins.
10.64
27.88
21.53
PKG
Ind Avg
S&P 500
HIGHLIGHTS
The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly
outperformed compared to the Containers & Packaging industry average. The net income increased by 5.8%
when compared to the same quarter one year prior, going from $98.51 million to $104.20 million.
EPS ANALYSIS¹ ($)
2013
2014
Q4 1.07
Q3 1.31
Q2 1.16
Q1 0.92
Q4 1.00
Q3 1.06
Q2 1.01
Q1 0.92
Q4 2.34
Q3 0.87
Q2 0.68
Q1 0.64
Regardless of the drop in revenue, the company managed to outperform against the industry average of
10.7%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. The declining revenue has
not hurt the company's bottom line, with increasing earnings per share.
2015
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
PACKAGING CORP OF AMERICA has improved earnings per share by 7.0% in the most recent quarter
compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per
share growth over the past year. However, we anticipate underperformance relative to this pattern in the
coming year. During the past fiscal year, PACKAGING CORP OF AMERICA increased its bottom line by earning
$4.46 versus $3.99 in the prior year. For the next year, the market is expecting a contraction of 2.8% in
earnings ($4.34 versus $4.46).
PKG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the
net result is that it is down by 42.20%, which is also worse that the performance of the S&P 500 Index.
Investors have so far failed to pay much attention to the earnings improvements the company has managed
to achieve over the last quarter. Looking ahead, the stock's sharp decline over the past year may have been
what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
The gross profit margin for PACKAGING CORP OF AMERICA is currently lower than what is desirable, coming
in at 26.62%. It has decreased from the same quarter the previous year. Regardless of the weak results of the
gross profit margin, the net profit margin of 7.49% is above that of the industry average.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 1
February 28, 2016
NYSE: PKG
PACKAGING CORP OF AMERICA
Sector: Materials Paper Packaging Source: S&P
Annual Dividend Rate
$2.20
Annual Dividend Yield
4.63%
PEER GROUP ANALYSIS
25%
WRK
V
FA
AB
OR
BMS
SEE
LE
AB
-15%
R
VO
FA
Revenue Growth (TTM)
LE
GPK
IP
52-Week Range
$44.32-$84.30
Price as of 2/25/2016
$47.46
The industry is capital intensive and mature with global annual growth rates between 3.0% and 3.5%. The
shift from glass and metals to various plastics and the subsequent introduction of innovative polypropylene
resealable containers may alter the industry landscape in the coming years. The industry has recently
witnessed overcapacity, which intensified restructuring and consolidation.
UFPT
UN
AEPI
AVY
Market Capitalization
$4.6 Billion
INDUSTRY ANALYSIS
The containers and packaging industry is comprised of companies that manufacture and distribute paper,
plastic, metal, and glass packaging products, cardboard containers, corrugated boxes, cans, bottles, plastic,
and foam food containers. The industry can be classified into two sub-categories: rigid packaging and
flexible packaging. Key players are Crown Holdings (CCK), Owens-Illinois (OI), Sealed Air (SEE), Bemis (BMS),
Greif (GEF), Graphic Packaging Holding (GPK), Ball (BLL), and Rock-Tenn (RKT).
REVENUE GROWTH AND EBITDA MARGIN*
SON
Beta
1.51
PKG
ATR
10%
20%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $158.3 Million and $14.3
Billion. Companies with NA or NM values do not
appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
Growth in end-user market segments, robust demand from emerging markets, demographic trends,
environmentally-friendly alternatives, and consumer preference toward suitability, portability, safety, and
durability, are growth drivers. The preference for more value-added packaging and customized packaging
solutions to provide convenience, upscale appearance, and freshness protection will bolster growth. Ongoing
technology advancements and continued efforts to innovate and differentiate will stimulate future demand.
The industry faces challenges from environmental regulation, intense competition from flexible packaging
categories, and a potential threat from emerging markets in Asia and the Middle East. On the macroeconomic
front, a slowdown in end-market segments such as food, beverage, healthcare, industrial packaging, and
other consumer markets threatens growth. Higher energy and raw material costs, especially plastic resins
and aluminum, are causes for concern.
Industry outlook remains stable. The slow recovery from the last economic downturn and should rebuild
demand at a modest pace. Despite cost-related pressures, packaging companies have benefitted from
improved pricing, increased productivity, and realized operational efficiencies. Most companies are
expanding their global footprint and realigning product mix in order to reduce costs, remain competitive, and
strengthen their financial position.
REVENUE GROWTH AND EARNINGS YIELD
25%
PEER GROUP: Containers & Packaging
WRK
V
FA
AB
OR
R
VO
FA
SEE
GPK SON
PKG
AEPI
IP
AVY
BMS
LE
AB
-15%
UN
Revenue Growth (TTM)
LE
UFPT
ATR
1%
10%
Earnings Yield (TTM)
Ticker
PKG
SEE
WRK
AVY
ATR
BMS
SON
AEPI
GPK
UFPT
IP
Recent
Company Name
Price ($)
PACKAGING CORP OF AMERIC 47.46
SEALED AIR CORP
46.36
WESTROCK CO
32.42
AVERY DENNISON CORP
66.24
APTARGROUP INC
74.34
BEMIS CO INC
48.77
SONOCO PRODUCTS CO
43.21
AEP INDUSTRIES INC
78.26
GRAPHIC PACKAGING HOLDING C 12.14
UFP TECHNOLOGIES INC
22.18
INTL PAPER CO
34.79
Market
Cap ($M)
4,604
9,086
8,230
5,924
4,642
4,618
4,362
399
3,921
158
14,304
Price/
Earnings
10.64
28.44
58.95
22.38
23.90
19.74
17.64
13.90
17.59
21.12
15.53
Net Sales
TTM ($M)
5,741.70
7,031.50
12,547.80
5,966.90
2,317.15
4,071.40
4,964.37
1,141.39
4,160.20
140.18
22,365.00
Net Income
TTM ($M)
436.80
335.40
-71.50
274.30
199.35
239.30
250.14
28.84
230.10
7.49
938.00
The peer group comparison is based on Major Paper Packaging companies of comparable size.
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -10.8% and
24.9%. Companies with NA or NM values do not
appear.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 2
February 28, 2016
NYSE: PKG
PACKAGING CORP OF AMERICA
Sector: Materials Paper Packaging Source: S&P
Annual Dividend Rate
$2.20
Annual Dividend Yield
4.63%
COMPANY DESCRIPTION
Packaging Corporation of America manufactures and
sells containerboard and corrugated packaging products
in the United States, Europe, Mexico, and Canada. The
company's Packaging segment offers various corrugated
packaging products, such as conventional shipping
containers used to protect and transport manufactured
goods; multi-color boxes and displays that help to
merchandise the packaged product in retail locations;
and honeycomb protective packaging. This segment also
produces packaging for meat, fresh fruit and vegetables,
processed food, beverages, and other industrial and
consumer products. Its Paper segment provides white
papers comprising commodity and specialty papers with
various features, such as colors, coatings, high
brightness, and recycled content. The white papers
consist of communication papers, including cut-size
office papers, and printing and converting papers; and
pressure sensitive papers, such as release liners that are
used to produce labels for use in consumer and
commercially-packaged products. This segment also
produces market pulp. Packaging Corporation of America
was founded in 1867 and is headquartered in Lake
Forest, Illinois.
PACKAGING CORP OF AMERICA
1955 West Field Court
Lake Forest, IL 60045
USA
Phone: 847-482-3000
http://www.packagingcorp.com
Beta
1.51
Market Capitalization
$4.6 Billion
52-Week Range
$44.32-$84.30
Price as of 2/25/2016
$47.46
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of PKG shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR
SCORE
4.5
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, PKG has a growth score better than 80% of the
stocks we rate.
strong
2.5
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 40% of the companies we
cover.
strong
4.5
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 80% of the companies we review.
strong
2.5
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 40% of the stocks we monitor.
strong
3.5
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 60% of the companies we analyze.
strong
4.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. The company's
dividend is higher than 80% of the companies we track.
strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 3
February 28, 2016
NYSE: PKG
PACKAGING CORP OF AMERICA
Sector: Materials Paper Packaging Source: S&P
Annual Dividend Rate
$2.20
Annual Dividend Yield
4.63%
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
Beta
1.51
Market Capitalization
$4.6 Billion
52-Week Range
$44.32-$84.30
Price as of 2/25/2016
$47.46
FINANCIAL ANALYSIS
PACKAGING CORP OF AMERICA's gross profit margin for the fourth quarter of its fiscal year 2015 has
decreased when compared to the same period a year ago. Even though sales decreased, the net income has
increased, representing an increase to the bottom line.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
1.00
4.34 E
4.55 E
Q1 FY16
2016(E)
2017(E)
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Q4 FY15
1,390.90
264.80
176.20
104.20
Q4 FY14
1,433.95
295.05
202.85
98.51
Q4 FY15
NA
NA
NA
NA
Q4 FY14
124.90
5,348.50
2,379.30
1,521.40
Q4 FY15
26.62%
19.03%
12.67%
NA
NA
NA
Q4 FY14
28.28%
20.57%
14.15%
1.09
7.34%
25.80%
Q4 FY15
NA
NA
22.30
7.90
Q4 FY14
2.58
0.61
23.09
8.79
Q4 FY15
97
0.55
1.07
NA
NA
1,264,440
Q4 FY14
98
0.40
1.00
15.47
NA
866,401
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 4
February 28, 2016
NYSE: PKG
PACKAGING CORP OF AMERICA
Sector: Materials Paper Packaging Source: S&P
Annual Dividend Rate
$2.20
Annual Dividend Yield
4.63%
Beta
1.51
Market Capitalization
$4.6 Billion
52-Week Range
$44.32-$84.30
Price as of 2/25/2016
$47.46
RATINGS HISTORY
Our rating for PACKAGING CORP OF AMERICA has
not changed since 9/1/2009. As of 2/25/2016, the
stock was trading at a price of $47.46 which is
43.7% below its 52-week high of $84.30 and 7.1%
above its 52-week low of $44.32.
VALUATION
BUY. PACKAGING CORP OF AMERICA's P/E ratio indicates a significant discount compared to an average of
27.88 for the Containers & Packaging industry and a significant discount compared to the S&P 500 average of
21.53. The current price-to-sales ratio is well below the S&P 500 average and is also below the industry
average, indicating a discount. After reviewing these and other key valuation criteria, PACKAGING CORP OF
AMERICA proves to trade at a discount to investment alternatives within the industry.
2 Year Chart
Price/Earnings
BUY: $71.93
$100
$80
$60
2014
1
2
3
premium
4
5
PKG 10.64
Peers 27.88
• Discount. A lower P/E ratio than its peers can
signify a less expensive stock or lower growth
expectations.
• PKG is trading at a significant discount to its peers.
2015
Price/Projected Earnings
MOST RECENT RATINGS CHANGES
Date
Price
Action
2/25/14
$71.93 No Change
From
Buy
To
Buy
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
3
32.19% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
35.29% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
32.52% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
4
5
Price/Book
1
2
3
premium
4
5
Price/Sales
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
PKG 1.23
Peers 1.64
• Discount. The PEG ratio is the stock’s P/E divided
by the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• PKG trades at a significant discount to its peers.
Earnings Growth
1
2
3
4
lower
5
higher
PKG 11.77
Peers 10.26
• Higher. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• PKG is expected to have an earnings growth rate
that exceeds its peers.
Sales Growth
discount
PKG 0.80
Peers 0.92
• Discount. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• PKG is trading at a discount to its industry on this
measurement.
3
PKG NA
Peers 8.06
• Neutral. The P/CF ratio is the stock’s price divided
by the sum of the company's cash flow from
operations. It is useful for comparing companies
with different capital requirements or financing
structures.
• Ratio not available.
discount
PKG NA
Peers 8.77
• Neutral. A lower price-to-book ratio makes a stock
more attractive to investors seeking stocks with
lower market values per dollar of equity on the
balance sheet.
• Ratio not available.
2
premium
discount
PKG 10.43
Peers 14.99
• Discount. A lower price-to-projected earnings ratio
than its peers can signify a less expensive stock or
lower future growth expectations.
• PKG is trading at a significant discount to its peers.
(as of 2/25/2016)
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
2
premium
Price reflects the closing price as of the date listed, if available
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
1
1
Price/CashFlow
discount
1
2
3
lower
4
5
higher
PKG -1.90
Peers -2.69
• Higher. A sales growth rate that exceeds the
industry implies that a company is gaining market
share.
• PKG has a sales growth rate that significantly
exceeds its peers.
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 5