Packaging Corp Looking Favorably Valued, Argus Lifts Price Target To $84

Packaging Corp Of America PKG announced a 15 percent hike in its quarterly dividend. Although Packaging Corp’s shares have outperformed over the past three months, the stock appears favorably valued relative to peers, Argus’s David Coleman said in a report. He maintained a Buy rating on the company, while raising the price target from $79 to $84.

Packaging Corp has raised its quarterly dividend by 15 percent to $0.63, or $2.52 annually, for a projected yield of about 3.2 percent. The company had reported its Q2 adjusted net income at $116 million or $1.25 per share, up from $114 million or $1.16 per share a year earlier. EPS came in ahead of the consensus, analyst Coleman mentioned.

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Estimates Revised

Management projected its Q3 EPS at $1.30, reflecting seasonally higher containerboard and corrugated product shipments, and lower annual outage costs. The company recently agreed to purchase TimBar Corp for $386 million in cash.

Coleman raised the EPS estimate for 2016 from $4.73 to $4.80, versus the current consensus of $4.78. He elaborated, “Our revised estimate reflects management’s third-quarter guidance and projected benefits from the forthcoming TimBar acquisition.”

Stock Valuation

Packaging Corp’s shares have gained 14.5 percent over the past three months, versus a 3.1 percent gain for the S&P 500. Over the past year, the company’s shares have gained 21.5 percent, compared to a 13.1 percent increase for the broad market and an 11.4 percent rise for the Basic Materials sector. The analyst said, however, that Packaging Corp’s stock “appears favorably valued relative to peers based on P/E, price/book, and EV/EBITDA multiples.”

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