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PACKAGING CORP OF AMERICA (PKG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid execution: revenue $2.17B, GAAP EPS $2.67, and EPS excluding special items $2.48; EPS ex-items beat company guidance by $0.07 and modestly beat S&P Global consensus, while revenue was slightly below consensus . EPS vs consensus and revenue consensus detail below (values with * from S&P Global).
  • Packaging segment margins expanded on full realization of earlier price increases and disciplined cost control; Packaging EBITDA ex-items was $452.9M, with CEO citing “higher margins in the Packaging segment” .
  • Management guided Q3 2025 EPS ex-items to $2.80, with expectations of higher corrugated shipments, lower maintenance outage expense, and slightly lower fiber costs; freight costs are expected higher due to rail rate increases; guidance excludes the pending Greif containerboard acquisition impact .
  • Narrative catalysts: continued pricing realization, disciplined operations amid tariff/global-trade uncertainty, and strategic Greif acquisition (asset-structured for depreciation shield) offering significant capital avoidance and integration benefits .

What Went Well and What Went Wrong

What Went Well

  • Full realization of earlier price increases and margin expansion in Packaging: “delivering strong earnings and cash flows as well as higher margins in the Packaging segment” .
  • Operational execution offset inflation: management highlighted “successfully manage costs… capital projects and efficiency initiatives,” helping offset inflation .
  • EPS above guidance: Q2 EPS excluding special items was $2.48, beating $2.41 guidance by $0.07, primarily due to lower operating and fiber costs .

What Went Wrong

  • Export containerboard sales lower due to global trade environment; customers remained cautious into July amid economic uncertainty .
  • Higher freight costs with full effect of rail rate increases at mills; higher operating costs and maintenance outage expense also weighed on results .
  • Paper segment volumes down 5% y/y and 7% q/q due to the International Falls outage; containerboard production down vs Q1 2025 as the company “ran to demand” .

Financial Results

Headline Financials vs Prior Periods

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$2,075.3 $2,146.1 $2,141.0 $2,171.3
Diluted EPS (GAAP) ($)$2.21 $2.45 $2.26 $2.67
Diluted EPS ex-items ($)$2.20 $2.47 $2.31 $2.48
EBITDA ex-items ($USD Millions)$404.0 $393.5 $421.1 $450.8

Actual vs Wall Street Consensus (S&P Global)

MetricConsensus (Q2 2025)Actual (Q2 2025)
EPS (Primary) ($)2.44408*2.48
Revenue ($USD Millions)2,189.6*2,171.3
EBITDA ($USD Millions)447.3*456.8

Values marked with * were retrieved from S&P Global.

Segment Breakdown

Segment Sales ($USD Millions)Q2 2024Q1 2025Q2 2025
Packaging$1,908.3 $1,970.3 $2,005.9
Paper$150.1 $154.2 $145.8
Corporate & Other$16.9 $16.5 $19.6
Total$2,075.3 $2,141.0 $2,171.3
Segment Operating Income ($USD Millions)Q2 2024Q1 2025Q2 2025
Packaging$279.8 $278.1 $346.3
Paper$26.7 $35.6 $25.8
Corporate & Other($30.5) ($33.4) ($38.4)
Income from operations$276.0 $280.3 $333.7
EBITDA ex-items ($USD Millions)Q2 2024Q1 2025Q2 2025
Packaging$400.0 $409.3 $452.9
Paper$30.6 $40.2 $30.3
Corporate & Other($26.6) ($28.4) ($32.4)
Total$404.0 $421.1 $450.8

KPIs

KPIQ4 2024Q1 2025Q2 2025
Corrugated products shipments per day (y/y)+9.1% total shipments; +3.2% per-day vs Q3’24 +2.5% vs Q1’24 +1.7% per day; flat total vs Q2’24 (one extra day in 2024)
Containerboard production (tons)1,310,000 1,250,000 1,195,000
Containerboard inventory change vs prior period (tons)+61,000 vs Q3’24 −3,000 vs Q4’24 −17,000 vs Q1’25
Containerboard inventory change vs prior year (tons)+54,000 y/y +75,000 y/y +38,000 y/y
Capital spending ($USD Millions)$201.3 $148.1 $169.7
Cash, cash equivalents, and marketable debt securities ($USD Millions)$852.2 $914.4 $955.9
Cash from operations ($USD Millions)——$300
Free cash flow ($USD Millions)——$130
Dividends paid ($USD Millions)——$112

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS (ex-items)Q2 2025$2.41 per share (issued at Q1 call) $2.48 actual Beat guidance by $0.07
EPS (ex-items)Q3 2025—$2.80 per share New guidance
Packaging prices/mixQ3 2025—Relatively flat Maintained level
Paper prices/mixQ3 2025—Flat Maintained level
Corrugated shipmentsQ3 2025—Higher Raised volume outlook
Export containerboard salesQ3 2025—Lower Lower
Maintenance outage expenseQ3 2025—Lower (no scheduled outages) Lower
Freight costsQ3 2025—Higher (rail rate increases) Higher
Operating costsQ3 2025—Near Q2 levels Maintained
Fiber costsQ3 2025—Slightly lower Lower
Inventory (containerboard)Q3 2025—Build ahead of Q4 DeRidder outage Strategic build
DividendQ2 2025—$1.25/share payable July 15, 2025 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs/macroQ1: “continued ambiguity relative to domestic and foreign tariff actions” Customers cautious; export sales lower due to global trade environment Ongoing uncertainty
Demand/box shipmentsQ4: record shipments; strong demand Per-day shipments +1.7% y/y; bookings trending up into July Steady/improving sequentially
Pricing realizationQ4/Q1: strong implementation of announced price increases Full realization in Packaging; margin expansion Sustained
Freight/logisticsQ1: rail rate increases at six mills Freight costs higher with full effect of rail rate increases Pressure increasing
Maintenance outagesQ1: pulled outage forward to Q2 No scheduled outages in Q3; lower outage expense expected Improving
Export containerboardQ1: export prices fairly flat Lower export sales; ran to demand, produced fewer tons Weakening
E-commerce—Customers growing mid-single digits YTD; second-half weighted Positive (2H-weighted)
Strategic M&A (Greif)—Pending acquisition; asset structure with bonus depreciation; capital avoidance (e.g., Dallas) Strategic progress

Management Commentary

  • “We operated very well during the quarter, delivering strong earnings and cash flows as well as higher margins in the Packaging segment. Pricing in the Packaging segment was consistent with expectations as we fully realized our earlier announced price increases.” — Mark W. Kowlzan, Chairman & CEO .
  • “Looking ahead… we expect higher corrugated shipments… [but] export containerboard sales will be lower due to the effects of the global trade environment… Considering these items, we expect third quarter earnings of $2.80 per share, excluding special items.” — Mark W. Kowlzan .
  • CFO: “Cash provided by operations was $300 million in the quarter, and free cash flow was $130 million… quarter-end cash balance… $956 million; liquidity of approximately $1.3 billion.” — Kent Pflederer .
  • Acquisition structure: “The acquisition will largely be structured as an asset acquisition… we will get the depreciation shield… opportunity… to take bonus depreciation at the higher level.” — Kent Pflederer .
  • Strategic fit: “It is a well-capitalized business that complements us nicely, and will provide us with a very good growth platform for both containerboard and corrugated products.” — CEO on Greif .

Q&A Highlights

  • Bookings and shipments: Management noted bookings trending ~10% above the last month of Q2 and sequential improvement into July, despite tough comps; operational uptime ~99% helped beat guidance via lower operating costs .
  • Demand drivers and end markets: Caution related to tariffs/global economy; weaker segments include automotive, building products (housing stagnation), and certain food/beverage categories; destocking largely complete, inventories lean at customers .
  • Export/containerboard production: Company produced 25–30k fewer tons y/y, choosing not to participate in weak export markets under current tariff conditions .
  • Greif acquisition economics: Asset structure with bonus depreciation; strong integration opportunities (e.g., Dallas facility capital avoidance; 70–75% integration level); incremental new debt modeled at 5.5% ($100M interest) .
  • E-commerce growth: Customer growth mid-single digits YTD; industry second-half weighted, implying potential volume tailwinds later in the year .

Estimates Context

  • Q2 2025 EPS (Primary) of $2.48 beat S&P Global consensus of $2.44408*, aided by lower operating and fiber costs; GAAP EPS was $2.67 .
  • Q2 2025 revenue of $2,171.3M was slightly below consensus $2,189.6M*, reflecting lower export containerboard volume and Paper segment volume impact from the International Falls outage .
  • Q2 2025 EBITDA of $456.8M was above consensus $447.3M*, reflecting pricing/mix and operational efficiency .

Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • EPS ex-items beat both company guidance and consensus; operational discipline and cost control offset tariff-related volume pressures — supportive for near-term sentiment .
  • Packaging price realization and margin strength continue; Packaging EBITDA ex-items rose to $452.9M on $2,005.9M segment sales .
  • Q3 guide to $2.80 EPS ex-items sets an above-trend bar, predicated on higher corrugated shipments, lower outage expense, and slightly lower fiber costs; watch freight inflation from rail rates .
  • Export containerboard remains a headwind given global trade environment; domestic volumes steady, with bookings improving into July .
  • Liquidity robust ($956M cash; ~$1.3B total liquidity); Q2 free cash flow $130M supports ongoing dividend ($1.25/share paid July 15) and strategic flexibility .
  • Pending Greif acquisition appears strategically accretive with capital avoidance and tax/depreciation advantages; integration level ~70–75% and complementary recycled capabilities (Massillon mill) could enhance network efficiency .
  • Near-term trading lens: emphasize margin durability and delivery versus the $2.80 Q3 guide; medium-term thesis hinges on pricing stability, disciplined capacity, and successful Greif integration amid tariff resolution.