PKG: Greif Acquisition Will Strengthen Scale While Market Awaits 2026 Pricing Trends

Narrative Update on Packaging Corporation of America

Analysts have slightly lowered their average price target for Packaging Corporation of America by $0.20 to $224.70, citing revised earnings estimates and a balanced industry outlook following recent acquisition activity and evolving sector fundamentals.

Analyst Commentary

Recent research and updates from major brokerages present a nuanced outlook on Packaging Corporation of America, reflecting both optimism for future performance and some ongoing caution regarding sector dynamics and company-specific factors.

Bullish Takeaways

Bullish analysts anticipate meaningful earnings growth for Packaging Corporation of America, especially as the Greif containerboard asset acquisition is integrated and begins to contribute to financial results.
The company’s scale and highly utilized system, strengthened by its recent acquisition, afford greater growth optionality in the coming years. This increases its competitive position in the U.S. market.
Optimism around continued strong cash flow from legacy assets and the new containerboard capacity suggest the potential for increased dividends in the near future.
Despite sector demand concerns, analysts see a structural supply-side shift and proactive capacity management in containerboard. This contributes to stable pricing and improved industry fundamentals.

Bearish Takeaways

Bearish analysts have tempered their earnings projections for Packaging Corporation of America, reflecting caution about near-term margin pressures and revised EPS forecasts for coming years.
There remains ongoing risk regarding sluggish containerboard demand. Capacity removals across the industry are viewed as necessary just to hold prices flat rather than drive meaningful growth.
Some analysts believe the stock’s peer group premium already reflects its best-in-class balance sheet and limited European exposure. This may potentially limit upside for new investors.
Uncertainty persists around the timing and magnitude of possible price increases in the containerboard segment. Expectations for a significant price hike are not until early 2026.

What's in the News

Packaging Corporation of America completed its share repurchase program, buying back 4,321,304 shares, which represents 4.69% of total shares outstanding, for $563.96 million as part of the buyback announced in January 2022 (Key Developments).
The company reported that from July 1, 2025 to September 30, 2025, no additional shares were repurchased. This marks the conclusion of the current buyback tranche (Key Developments).
Packaging Corporation of America issued earnings guidance for the fourth quarter of 2025 and projects earnings of $2.40 per share, excluding special items (Key Developments).

Valuation Changes

Consensus Analyst Price Target: Decreased marginally from $224.90 to $224.70.
Discount Rate: Increased slightly from 7.07% to 7.08%.
Revenue Growth: Lowered from 8.82% to 8.29%.
Net Profit Margin: Improved modestly from 11.04% to 11.18%.
Future P/E: Increased very slightly from 19.70x to 19.72x.

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.What are the underlying business or industry changes driving this perspective?

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 Earnings and Revenue Growth

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.

PKG: Recent Acquisition And Anticipated Price Increases Will Drive Upside