Last Update 17 Nov 25
PKG: Greif Acquisition Will Boost Scale And Drive Dividend Upside Ahead
Analysts have recently adjusted their price targets for Packaging Corporation of America, with the average target changing by less than $1 as they consider the impact of industry supply shifts, stable margins, and benefits from the Greif acquisition.
Analyst Commentary
Recent Street research reveals a mix of optimism and caution regarding Packaging Corporation of America's outlook, with price targets moving both up and down as analysts assess the company's strategic initiatives and industry dynamics.
Bullish Takeaways- Bullish analysts point to rapidly increasing scale and growth optionality following the acquisition of Greif's containerboard assets. This acquisition is expected to drive further capacity and efficiency improvements.
- Packaging Corp. is recognized for its strong operational execution. The company has best-in-class margins and a robust balance sheet, which supports a premium valuation compared to peers.
- Forecasts highlight the potential for meaningful dividend increases over the next few quarters, underpinned by strong cash flow and prudent capital expenditure management.
- The U.S. market's ongoing structural supply-side shift, including capacity reductions among competitors, is seen as a key factor positioning Packaging Corp. to benefit from stable or even rising pricing in containerboard, especially heading into 2026.
- Bearish analysts are tempering expectations for near-term earnings and are lowering EPS forecasts for 2025 and 2026 due to industry headwinds and integration costs from recent acquisitions.
- Some caution that Packaging Corp.'s shares may already reflect much of the upside, given its premium valuation relative to peers. This could potentially limit risk/reward over the short term.
- While capacity discipline has supported pricing, continued sluggish demand fundamentals could constrain revenue growth if market conditions do not improve.
- Uncertainty remains around the timing and magnitude of anticipated price increases in containerboard. Some analysts expect a delayed impact that may not fully materialize until after Q3 2025.
What's in the News
- Packaging Corporation of America has completed the repurchase of 4,321,304 shares, representing 4.69% of outstanding shares for a total of $563.96 million. This was conducted under the buyback announced on January 27, 2022. No shares were repurchased in the most recent tranche from July 1, 2025 to September 30, 2025 (Key Developments).
- The company provided earnings guidance for the fourth quarter of 2025, expecting earnings of $2.40 per share, excluding special items (Key Developments).
Valuation Changes
- Fair Value Estimate remains unchanged at $224.90.
- The discount rate has risen slightly, increasing from 6.81% to 7.07%.
- Revenue growth expectations are steady, holding at 8.82%.
- Net profit margin remains unchanged at approximately 11.04%.
- The future P/E ratio has decreased marginally, moving from 19.77x to 19.70x.
Key Takeaways
- Strong execution on price increases and new box plant efficiency suggest potential for improved net margins and earnings growth.
- Strategic capital investments and focus on high-performance grades may enhance productivity and operational profitability, driving revenue growth.
- Economic uncertainty, operational costs, and demand forecast challenges could compress margins and lead to inconsistent revenues and earnings.
Catalysts
About Packaging Corporation of America- Manufactures and sells containerboard and uncoated freesheet (UFS) paper products in North America.
- Packaging Corporation of America's strong execution on price increases, especially in its Packaging segment, suggests potential for revenue growth as prices continue to be implemented, impacting overall revenue positively.
- The successful startup of the new efficient box plant in Glendale, Arizona, is expected to increase productivity, reduce costs, and enhance service capabilities, potentially improving net margins and earnings in future quarters.
- Anticipation of stronger box shipments in the second half of the year, resulting from sustained demand and customer inventory restocking, could lead to higher revenue growth.
- Planned maintenance scheduling adjustments and strategic capital investments suggest improved operational efficiency and cost management, potentially enhancing net margins.
- Continued focus on high-performance grades and leveraging technological advancements in paper production may drive volume growth and operational profitability, positively impacting earnings.
Packaging Corporation of America Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Packaging Corporation of America's revenue will grow by 3.2% annually over the next 3 years.
- Analysts assume that profit margins will increase from 10.4% today to 11.8% in 3 years time.
- Analysts expect earnings to reach $1.1 billion (and earnings per share of $11.6) by about September 2028, up from $898.4 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.7x on those 2028 earnings, down from 21.3x today. This future PE is lower than the current PE for the US Packaging industry at 22.2x.
- Analysts expect the number of shares outstanding to grow by 0.22% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.
Packaging Corporation of America Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The economic uncertainty and trade tensions mentioned in the call could negatively impact demand, potentially leading to lower revenues and earnings.
- Higher operational costs, including scheduled maintenance outages and increased rail contract rates, could compress net margins and reduce overall earnings.
- Fluctuating paper segment volumes and potential lower containerboard production volume might lead to inconsistent revenues and put pressure on earnings.
- The ongoing inflationary pressures on costs, despite some relief from lower fiber prices, could erode profit margins if not managed effectively.
- Dependence on demand forecast accuracy and potential over
- or under-production risks due to economic ambiguity may lead to inventory challenges and impact revenue and earnings predictability.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $213.444 for Packaging Corporation of America based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $244.0, and the most bearish reporting a price target of just $152.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.5 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 20.7x, assuming you use a discount rate of 6.8%.
- Given the current share price of $214.07, the analyst price target of $213.44 is 0.3% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
