Packaging Corporation of America Is Ready to Ship Profits

The latest earnings report from Packaging Corporation of America hints at just how substantial the company's recent acquisition of Boise Inc. could be in the future.

Feb 17, 2014 at 9:44AM

Packaging Corporation of America (NYSE:PKG) recently announced fourth-quarter and full-year results for fiscal 2013. The record results for the company indicate the continued success of management's long-term growth plans and illustrate why Packaging Corporation remains a better growth investment than competitors like MeadWestvaco (NYSE:WRK) and Rock-Tenn Company (NYSE:RKT).

Perhaps most importantly, Packaging Corporation's impressive performance in the fourth quarter was due in large part to the company's 2013 acquisition of smaller rival Boise. This added growth from Boise highlights just how substantial the acquisition could be for Packaging Corporation in the future.


PCA mill, the company produces over 2.6 million tons of corrugated materials per year

Record earnings
Packaging Corporation reported record net fourth-quarter income of $277 million, or $2.33 per diluted share. With items excluded, net income was $101 million, or $1.04 per diluted share. This result compares favorably to 2012's comparable-quarter result of $59 million net income, or $0.61 per diluted share, and represents EPS growth of 70.49%.

On a revenue basis, the company reported $1.26 billion in sales for the fourth quarter, up a staggering 76.39% from last year's comparable-quarter sales of $737 million. 

Chief executive officer Mark W. Kowlzan explained, "We finished 2013 with another outstanding quarter, achieving all-time record earnings from improved prices, strong corrugated products volume, and productive and efficient mill operations." 

These results came in significantly above the consensus estimates. On average, analysts expected Packaging Corporation to achieve $0.89 in diluted earnings per share on $1.06 billion in sales. Accordingly, in pre-market trading the following day shares of Packaging Corporation were up over 5%, representing an all-time high price at the open. 

The Boise effect
As mentioned before, a large portion of Packaging Corporation's growth in the fourth quarter was driven by the acquisition of Boise, an Idaho-based producer of corrugated and linerboard products. In September, Packaging Corporation announced that it would buy its smaller competitor in a deal worth just under $2 billion in cash, which included Boise's $714 million in outstanding debt. 

Nearly half of the company's quarterly, year-over-year $0.43 EPS improvement was a result of the inclusion of the Boise business. Packaging Corporation achieved a $0.23 EPS improvement as a result of improved price, mix, and volume. However, just a partial quarter of Boise's business added an additional $0.20 EPS improvement in the quarter.

CEO Kowlzan explained, "The integration of Boise's operations with PCA is well under way, and we are finding additional synergy opportunities as the process continues."

Industry-leading growth
Not surprisingly, the addition of the Boise business has created an industry-leading growth company in Packaging Corporation of America. The company, which is now the fourth-largest producer of containerboard and corrugated products in the nation,  is projected to lead competitors like MeadWestvaco and Rock-Tenn by a wide margin for the most part. 



Packaging Corporation


Revenue Growth 2014




EPS Growth 2014




*The Rock-Tenn fiscal year ends in September.

Aside from MeadWestvaco's massive projected increase in EPS for 2014, which is a combined result of favorable year-over-year comparisons as well as drastically improving mill capacity at the company's Brazilian operations and a successful margin improvement plan, Packaging Corporation is expected to lead its competitors significantly. Especially impressive is the company's revenue growth estimate for 2014, a direct result of the Boise acquisition.

Also impressive is Packaging Corporation's current valuation. The company's future 12-month P/E multiple of 13.38 is significantly cheaper than MeadWestvaco's 16.91 multiple and only slightly more expensive than Rock-Tenn's 11.49 multiple. This means that investors do not have to pay much of a premium for industry-leading growth at the moment. 

Packaged for growth
On the heels of a very solid earnings report, Packaging Corporation of America seems poised for a very impressive 2014. Most importantly, preliminary results from the company's first partial quarter indicate that the Boise addition was a strong one. Accordingly, Packaging Corporation remains a great consideration for cheap, long-term growth.

Packaging Corp is a good stock, but we have another one that's even better. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Philip Saglimbeni has no position in any stocks mentioned. The Motley Fool owns shares of Rock-Tenn Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers