As you might know, Packaging Corporation of America (NYSE:PKG) just kicked off its latest third-quarter results with some very strong numbers. The company beat expectations with revenues of US$1.7b arriving 3.0% ahead of forecasts. Statutory earnings per share (EPS) were US$1.46, 6.2% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Packaging Corporation of America's 13 analysts are now forecasting revenues of US$6.89b in 2021. This would be a credible 3.4% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 25% to US$6.23. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$6.70b and earnings per share (EPS) of US$5.80 in 2021. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 9.8% to US$115per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Packaging Corporation of America analyst has a price target of US$135 per share, while the most pessimistic values it at US$85.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Packaging Corporation of America's revenue growth is expected to slow, with forecast 3.4% increase next year well below the historical 4.8%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.4% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Packaging Corporation of America.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Packaging Corporation of America following these results. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Packaging Corporation of America analysts - going out to 2022, and you can see them free on our platform here.
You still need to take note of risks, for example - Packaging Corporation of America has 2 warning signs we think you should be aware of.
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