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PACKAGING CORP OF AMERICA (PKG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 results were solid operationally but slightly below Street on EPS: adjusted EPS $2.73 vs S&P Global consensus $2.82 (MISS), on net sales $2.313B essentially in line with $2.314B consensus; legacy PCA performance beat its $2.80 guidance by ~$0.04 ex-acquisition, but Greif integration/outage and interest shaved ~$0.11 from consolidated EPS . EPS/Revenue estimates from S&P Global: $2.82 / $2.3148B*.
  • Packaging segment EBITDA margin expanded to 23.1% (vs 22.6% in Q2; 22.2% LY) on pricing/mix and lower fiber; Paper posted a 24.9% margin; company delivered record quarterly cash from operations ($469M) and record FCF ($277M) .
  • Q4 guide: EPS ex-special items $2.40, with outage costs +$0.29/share sequential headwind, lower seasonal mix, and slightly higher energy/fiber; expects improvement from acquired business as mills restart and inventories normalize .
  • Greif containerboard business closed Sep 2; one-month impact: D&A step-up ~$12M, interest +$8M, outages/timing effects ~$12M; net effect ≈ ($0.11)/share this quarter; synergy path reiterated: ~$60M run-rate by year 2; legacy OCC furnish to rise to ~30% with the assets .
  • Near-term stock catalysts: integration updates, Q4 outage cadence vs guide, containerboard/corrugated demand trajectory into holiday, and visibility on energy self-generation projects to mitigate electricity inflation .

What Went Well and What Went Wrong

What Went Well

  • Packaging margin expansion and pricing/mix execution: Packaging EBITDA margin reached 23.1% vs 22.6% in Q2 and 22.2% LY; management cited “very strong quarter” in legacy packaging with volume/mix largely on plan and efficient mill operations .
  • Record cash generation: Cash from operations $469M and FCF $277M, despite acquisition funding and capex; quarter-end cash and marketable securities $806M with ~$1.4B liquidity .
  • Early integration wins: Riverville ran ~97.2% in September with “immediate improvements in both efficiency and quality”; extensive refurbish at Massillon expected to lift performance; culture fit and price realization noted in acquired box plants .

What Went Wrong

  • EPS miss vs Street driven by Greif-related items and costs: Adjusted EPS $2.73 vs $2.82 consensus as purchase accounting D&A ($12M), interest (+$8M), and outages/timing ($12M) weighed; legacy PCA beat its $2.80 guidance by ~$0.04 ex-acquisition .
  • Legacy corrugated shipments softened YoY on tough comps: per-day shipments down 2.7% (legacy); total including acquired up 3.7% per day (5.3% total), but underlying market ordering remained cautious .
  • Cost inflation and headwinds: Higher operating costs, freight, and depreciation; electricity rates cited as a major pressure point (up 50–75% at some facilities), prompting self-generation projects .

Financial Results

Headline results vs prior periods and S&P Global estimates

MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 S&P Consensus*
Net Sales ($USD Millions)2,182.4 2,171.3 2,313.4 2,314.8*
Diluted EPS (GAAP) ($)2.64 2.67 2.51 —
Diluted EPS excl. Special Items ($)2.65 2.48 2.73 2.82*
EBITDA excl. Special Items ($USD Millions)460.6 450.8 503.4 506.4*

Notes: An asterisk indicates values retrieved from S&P Global.

Segment performance

Metric ($USD Millions)Q3 2024Q2 2025Q3 2025
Segment Sales – Packaging2,008.7 2,005.9 2,128.1
Segment Sales – Paper159.3 145.8 161.2
Segment Operating Income ex SI – Packaging321.6 321.7 347.9
Segment Operating Income ex SI – Paper38.5 25.8 35.6
Segment EBITDA ex SI – Packaging445.6 452.9 491.8
Segment EBITDA ex SI – Paper43.1 30.3 40.1

KPIs and operating metrics

KPIQ2 2025Q3 2025
Corrugated shipments (legacy PCA, per-day YoY)+1.7% vs Q2’24 −2.7% vs Q3’24; incl. acquired: +3.7% per-day, +5.3% total
Containerboard production (tons)1,195,000 Legacy 1,255,000; Acquired 47,000
Legacy containerboard inventory (tons)—417,000; +56,000 YoY; +15,000 QoQ
Packaging EBITDA margin22.6% 23.1%
Paper EBITDA margin20.8% 24.9%
Cash from Operations ($M)300 469
Free Cash Flow ($M)130 277

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS (ex-special items)Q3 2025$2.80 ex-SI (legacy PCA; no Greif assumption) Actual ex-SI $2.73; legacy PCA ex-SI ~$2.84 vs $2.80 guide Legacy PCA beat ~$0.04; consolidated below due to Greif headwinds
EPS (ex-special items)Q4 2025—$2.40 New guidance introduced
Outage expense impactQ4 2025—+$0.29/share vs Q3 (legacy PCA) Higher sequential
Annual shutdown expenseQ4 2025—Legacy ~$0.45; Acquired ~$0.02 New disclosure
Export containerboardQ4 2025—Higher than Q3, but “relatively low” vs typical Q4 Qualitative lower-than-normal
Packaging prices/mixQ4 2025—Lower due to seasonally less rich mix Seasonal decline
Energy and fiber costsQ4 2025—Seasonally higher; freight/other roughly flat Headwinds
2025 CapexFY 2025$840–$870M ~ $800M Lower (timing)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Greif acquisition & synergiesQ2: Pending acquisition; strategic fit, capital avoidance in key regions Closed Sep 2; outages and D&A/interest timing impacted EPS; Riverville ~97.2% in Sept; synergy target ~$60M run-rate yr2; ~$20M run-rate by Q2’26 Execution underway; near-term cost drag, medium-term accretion
Customer ordering & demandQ1: Solid demand with some pullback mid-quarter ; Q2: cautious ordering, bookings +2% YoY entering Q3 Cautious ordering persisted but improved through quarter; bookings/billings slightly >1% entering Q4 Gradual improvement
Exports/tradeQ2: lower export containerboard sales amid global trade tensions Export sales to rise vs Q3 but remain low vs typical Q4 Still subdued
Energy costs & projectsQ2: rail rate increases; broad inflation Electricity rates up 50–75% at some sites; plan to take 3 mills “electricity independent” via gas turbine combined-cycle projects; 1.5-year paybacks Active mitigation
End-market mixQ2: softness in building products, auto, sugary beverages Beef (cattle herds at 70-yr low) and building materials remain drags; others solid; customers carry lean inventories Mixed; inventory lean
Recycled furnish mix—OCC furnish to move from low-20% to ~30% with Greif assets Higher recycled mix lever

Management Commentary

  • “We had a very strong quarter in the legacy PCA packaging business… Our containerboard mills continued to operate very efficiently and we ended the quarter at targeted containerboard inventory levels in the legacy PCA system.”
  • On Greif: “We executed a complete refurbishment [at Massillon]… At the Riverville mill, we took five-day outages on both paper machines… While these activities significantly impacted results in September, we are already seeing the benefits of improved performance.”
  • Capital and power: “Electricity rates are up 50% to 75%... we’ve got three significant projects… that will take three of our mills essentially electricity independent within the next two and a half years.”
  • Liquidity and capex: “We are revising our capital forecast for the year to be approximately $800 million… primarily as a result of timing” .

Q&A Highlights

  • Bookings/billings: Entering Q4, bookings/billings were a little over 1% up despite tough comps .
  • Greif financial impact: Purchase accounting D&A ($12M), added interest (+$8M), outages/timing ($12M) lowered Q3; annualized D&A run-rate $130M; net interest +$95M/yr; synergy target unchanged ($60M yr2) .
  • End-market headwinds: Beef (70-year low cattle herds) and building materials/housing are headwinds; other segments steady; customers at very low inventory levels .
  • Recycled furnish & capability: System OCC furnish to ~30%; recycled medium complements high-performance liners; logistics synergies near Massillon .
  • Energy self-generation projects: Management expects strong returns (≈1.5-year paybacks) and to reduce exposure to grid electricity inflation .

Estimates Context

  • Q3 2025: Adjusted EPS $2.73 vs S&P Global consensus $2.82 (MISS); Revenue $2.3134B vs $2.3148B consensus (in line); EBITDA ex-special items $503.4M vs EBITDA consensus $506.4M (slight miss). Values retrieved from S&P Global.* Actuals per company filings and non-GAAP reconciliations .
  • Q4 2025: Company guides EPS ex-special items $2.40 vs S&P Global consensus $2.41, implying a guide roughly in line with consensus despite higher outage and seasonal headwinds.* Guidance drivers include outage impact (+$0.29/share), seasonally less rich mix, higher energy/fiber, and improved acquired operations .

Key Takeaways for Investors

  • Core business momentum persists: Legacy packaging margins improved and pricing/mix held, supporting high-20% segment EBITDA margins into seasonally softer Q4 .
  • EPS optics vs Street reflect acquisition timing: Underlying legacy PCA exceeded its $2.80 guide by ~$0.04, but Greif-related D&A, outages, and interest cut ~$0.11 from consolidated EPS; as outages subside and integration advances, drag should abate .
  • Cash generation and balance sheet remain strengths: Record quarterly CFO and FCF provide flexibility for integration, capex, and shareholder returns; liquidity ~$1.4B .
  • Q4 setup: Guide of $2.40 contemplates outages (+$0.29/share), seasonal mix, and cost inflation; monitor execution vs these known headwinds and acquired mills’ performance ramp .
  • Structural levers: Energy self-generation projects and recycled furnish flexibility should mitigate inflation and expand margin resiliency over 12–30 months .
  • Demand watch: Cautious ordering showed improvement through Q3; bookings/billings up slightly entering Q4; end-market recovery in beef/housing would be upside catalysts .
  • Integration KPIs: Track Riverville/Massillon uptime, acquired inventory normalization, and synergy realization cadence (~$20M run-rate by Q2’26; ~$60M run-rate yr2) .

*Values retrieved from S&P Global.

Citations:

  • Q3 2025 8-K earnings release, financials, and guidance .
  • Q3 2025 earnings call transcript for margins, cash flows, integration, and Q&A details .
  • Q2 2025 8-K and call for prior-period comps and guidance .
  • Q1 2025 8-K for early-year trend context .