Despite the lingering supply chain issues and labor shortages, the packaging and container industry has been flourishing over the past year, thanks to the substantial demand driven by increasing consumption in various industries, including consumer goods, food and beverage, healthcare, industrial, household care, and cosmetics. The surging retail industry and the emergence of e-commerce businesses have been driving the growth of the packaging and container industry lately. Investors’ interest in the industry is evident in S&P Materials Select Sector Index’s 9.9% gains over the past year.
The global packaging industry is expected to reach $1.05 trillion by 2024, growing steadily at 2.8% per year. The industry’s growth is driven by evolving consumer and industry trends. Packaging and container companies are addressing sustainability issues alongside an increase in flexible packaging and are incorporating digitalization and innovation to meet consumer needs. The demand for eco-friendly flexible packaging is rising rapidly in the U.S.
Given these factors, we think it could be profitable to add high-quality packaging and container stocks Packaging Corporation of America (PKG) and Silgan Holdings Inc. (SLGN) to one’s portfolio. These stocks hit their 52-week highs recently and have plenty of upside remaining.
Silgan Holdings Inc. (SLGN)
SLGN manufactures and sells rigid packaging for consumer goods products in North America, Europe, and internationally. The Stamford, Conn., company operates through three segments: Dispensing and Specialty Closures; Metal Containers; and Custom Containers. SLGN offers steel and aluminum containers, metal and plastic closures, capping and sealing equipment, dispensing systems, and detection systems.
Last month, SLGN announced that its board of directors had authorized the company to repurchase up to $300 million of its common stock through Dec. 31, 2026. "As in the past, we maintain a disciplined approach to capital deployment with a priority towards growth investments for the Company," stated Adam Greenlee, president and CEO of SLGN.
In February, SLGN declared a quarterly cash dividend of $0.16 per share on its common stock, paid on March 31, 2022. This represents a 14.3% increase from the prior year in the company’s quarterly cash dividend. The company has increased its dividend for 18 consecutive years since its initiation based on its strong financial performance and business prospects.
SLGN's net sales increased 17.3% year-over-year to $1.44 billion in its fiscal year 2021 fourth quarter, ended Dec. 31, 2021. SLGN’s gross profit improved 7% year-over-year to $213.80 million. ARCB’s net income and net income per share came in at $85 million and $0.76, respectively, registering an increase of 41.4% and 40.7% from the prior-year period.
Analysts expect SLGN's revenue for its fiscal year 2022 first quarter, ended March 31, 2022, to come in at $1.39 billion, representing a 12.2% rise year-over-year. The Street expects the company's EPS for the to-be-reported quarter to be $0.77, representing a 2.8% increase year-over-year. The company has an impressive earnings surprise history; it has surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of SLGN have increased 5.9% in price year-to-date and 7% over the past month. It closed yesterday's trading session at $45.36. The stock is currently trading 3.6% below its 52-week high of $46.98, which it hit on March 22, 2022.
SLGN's POWR Ratings reflect this promising outlook. It has an overall grade of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
SLGN has a B grade for Growth and Stability. Within the B-rated Industrial - Packaging industry, it is ranked #9 of 22 stocks.
To see additional POWR Ratings (Momentum, Value, Quality, and Sentiment) for SLGN, click here.
Click here to check out our Industrial Sector Report for 2022
Packaging Corporation of America (PKG)
PKG manufactures and sells packaging products in the U.S. The Lake Forest, Ill., company operates through two segments: Packaging; and Paper. PKG offers a wide range of containerboard and corrugated packaging products. It sells corrugated products through direct sales, marketing organizations, independent brokers, and distribution partners. In addition, PKG sells commodity and specialty papers and communication papers.
In February, PKG declared a regular quarterly dividend of $1.00 per share on its common stock. The quarterly dividend will be paid on April 15, 2022. The payment of dividends reflects the company’s strong financial performance and ability to pay back to the shareholders.
In its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, PKG's net sales increased 19.2% year-over-year to $2.04 billion. Its gross profit improved 53% from the prior-year period to $509.90 million. The company’s income from operations rose 87.9% year-over-year to $355.70 million. Its EBITDA excluding special items grew 58.1% year-over-year to $462.80 million. And PKG’s net income rose 75.3% year-over-year to $216.50 million. The company's earnings per share increased 75.4% year-over-year to $2.28.
The $2.04 billion consensus revenue estimate for its fiscal 2022 first quarter, ended March 31, 2022, represents 12.7% growth from the same period in 2021. The $2.52 consensus EPS estimate for the to-be-reported quarter indicates a 42.2% year-over-year rise. It is no surprise that PKG has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock gained 13.2% in price year-to-date and 10.9% over the past three months and closed yesterday's trading session at $154.08. The stock is currently trading 2.8% below its 52-week high of $158.47, which it hit on March 30, 2022.
PKG's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
PKG has a B grade for Stability, Quality, and Sentiment. Within the Industrial - Packaging industry, it is ranked #5 of 22 stocks.
To see additional POWR Ratings (Value, Growth, and Momentum) for PKG, click here.
Click here to check out our Industrial Sector Report for 2022
SLGN shares were trading at $46.00 per share on Wednesday afternoon, up $0.64 (+1.41%). Year-to-date, SLGN has gained 7.76%, versus a -5.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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