Packaging is essential to product distribution, therefore consumer-oriented end-markets will continue to support the Zacks Containers – Paper and Packaging business. E-commerce and environmental concerns will boost the business. Industry pricing will mitigate supply-chain disruptions and increased prices.
PKG, ATR, GPK, and SON will benefit from these trends.
Industry Description
Zacks Containers – Paper and Packaging firms make paper and plastic packaging. Industry packaging solutions protect and preserve products, prolong shelf life, and reduce wastage and loss across the extensive and lengthy distribution routes.
Containerboard, corrugated, and rigid plastic packaging are available. Some companies make beauty, personal, home, and healthcare dispensing pumps, closures, aerosol valves, and applicators. The industry serves food, beverage, food services, beauty, personal care, and home care markets.
They serve chemical, agriculture, medical, pharmaceutical, electronics, and industrial markets.
The Containers-Paper-Packaging Industry’s Future
E-commerce Drives: Packaging protects a product’s integrity and longevity, making it increasingly important as e-commerce has grown and the pandemic accelerated it. Packaging aids product delivery.
Statista expects worldwide retail e-commerce revenues to climb 11.5% to $6.35 trillion by 2027. Global retail sales were roughly 19% e-commerce in 2021. By 2026, 25% of global retail sales will be online. The Containers-Paper-Packaging industry will benefit.
The sector has over 60% exposure to consumer-oriented end markets like food and drinks and healthcare, which keeps packaging demand constant across economic cycles.
Industry Needs Eco-Friendly Packaging: Customers’ growing environmental consciousness is driving global demand for biodegradable packaging. The industry adopts new technologies and introduces new items to meet the same. Producers started using recycled content. Recycling maximizes environmentally and economically sustainable output.
High Costs & Supply-Chain Issues: Inflationary pressure, limited raw material availability, and global transportation disruptions continue to cause supply-chain disruptions and higher raw material costs for industry participants. Labor, transportation, and chemical prices increased their problems. Labor shortages hampered output and strong demand.
Companies have been cutting costs, which should maintain margins. To improve, they streamline processes and align with high-growth markets. Due to inflation, consumer spending on items has dropped, lowering volume for some enterprises.
Industry Rank
Zacks Industrial Products includes the 10-stock Zacks Containers – Paper and Packaging business. The industry ranks 40th out of 251 Zacks industries.
The group’s Zacks Industry Rank—the average of all member stocks’ Zacks Ranks—indicates promising near-term prospects. The top 50% of Zacks-ranked industries outperform the bottom 50% by about 2 to
Industry Rank
Before listing certain Containers – Paper & Packaging stocks to keep in your portfolio, it’s worth reviewing the industry’s stock-market performance and value.
Industry Versus Broader Market
Containers – Paper and Packaging has beaten the S&P 500 but trailed the sector during the past year. The S&P 500 fell 4.4% while the industry fell 3.7%. Industrial Products fell 1.0%.
One-Year Price Performance
Industry Value
The industry’s trailing 12-month EV/EBITDA ratio is 17.60X, compared to the S&P 500’s 11.00X and the Industrial Products sector’s 14.52X. See charts underneath.
EV/EBITDA (TTM).
EV/EBITDA (TTM).
The industry traded between 30.07X and 10.95X over the past five years, with the median being 18.35X.
4 Containers—Paper and Packaging Stocks to Watch
AptarGroup: The Beauty segment will benefit from rising beauty and personal care demand. Prescription and consumer healthcare demand is rising in Pharma. AptarGroup is growing its capacity to make elastomer components for injectable pharmaceuticals and active material science solutions to support near-term growth due to sales momentum.
A business-transformation plan will increase top-line growth, operational excellence, innovation, and organizational effectiveness. The company continues to attract global brands with its new product launches. Acquisitions to broaden technology, locations, and products will also help growth. ATR shares rose 7.6% in three months.
AptarGroup’s fiscal 2023 Zacks Consensus Estimate has increased 3.5% in the past 90 days. Annual growth is 1.8%. This Crystal Lake, IL-based corporation averages a 5% trailing four-quarter earnings surprise. The stock has a Zacks Rank #2 (Buy) with anticipated 7% long-term growth.
View today’s Zacks #1 Rank (Strong Buy) stocks here.
Price/Consensus: ATR
Sonoco: The Metal Packaging acquisition mainly benefits consumer packaging. To combat increased raw material and non-material inflation, SON is aggressively pricing its operations.
Sonoco’s near-term outcomes will be driven by its focus on business optimization through productivity enhancement, standardization, and cost reduction. SON is investing in its consumer and industrial divisions to reach $1 billion in EBITDA by 2026. The stock has gained 1.7% in three months.
Sonoco’s fiscal 2023 Zacks Consensus Estimate has increased 0.3% in the past 90 days. The Hartsville, SC-based company averages a 6.1% trailing four-quarter earnings surprise. It has a Zacks Rank #2 and 5% long-term growth.
Price/Consensus: SON
Graphic Packaging: Consumers want sustainable, fiber-based packaging, giving GPK business options. Its organic sales growth is driven by innovation and circular consumer packaging.
GEF shares rose 4.2% in three months. To meet global demand for recyclable, fiber-based consumer goods packaging, the company is working with new and existing customers. As its state-of-the-art coated recycled board machine in Kalamazoo, MI, ramps up production, GPK is well-positioned to address this rising demand for recycled content in paperboard packaging.
The equipment will reduce water and energy use and make GPK North America’s lowest-cost coated recycled board producer. It will add $130 million to EBITDA over three years. Graphic Packaging has been taking price actions to combat commodity input cost escalation.
Over the past 90 days, this Atlanta-based player’s fiscal 2023 Zacks Consensus Estimate has increased 8.3%. Annual increase is 18%. Average trailing four-quarter profit surprise is 14.2%. GPK has a Zacks Rank #3 (Hold) and a 25% long-term earnings growth rate.
Price/Consensus: GPK
Packaging Corp: E-commerce and constant demand for meat, fruit, vegetables, processed food, beverages, and medications have boosted the company’s packaging industry, which accounts for 91% of revenues. Most end markets demand containerboard and corrugated goods.
PKG shares rose 10.9% in three months. Capital allocation is balanced to maximize growth and shareholder profits. It will address increasing packaging demand by converting its Jackson, AL mill’s No. 3 paper machine to linerboard over three years.
Packaging Corp’s current-year Zacks Consensus Estimate has increased by 1.4% in the past 90 days. PKG averages 6.2% trailing four-quarter earnings surprises. The Lake Forest, IL-based corporation expects 5% long-term earnings growth. Zacks Rank #3.
Price/Consensus: PKG
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