Packaging Corporation of America (NYSE: PKG) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 6% year on year to $2.31 billion. Its GAAP profit of $2.51 per share was 11.5% below analysts’ consensus estimates.

Is now the time to buy Packaging Corporation of America? Find out by accessing our full research report, it’s free for active Edge members.

Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “We had a very strong quarter in the legacy PCA packaging business, with corrugated volume continuing to reflect cautious ordering patterns and improving throughout the quarter, with volume and price largely on plan. Export containerboard sales volume remained relatively low with continued trade uncertainty. Our containerboard mills continued to operate very efficiently and we ended the quarter at targeted containerboard inventory levels in the legacy PCA system. The Paper segment delivered another outstanding quarter on strong sales volume and operating performance at the International Falls mill.”

Company Overview

Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Packaging Corporation of America’s sales grew at a tepid 5.7% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Packaging Corporation of America’s annualized revenue growth of 5.8% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

We can better understand the company’s revenue dynamics by analyzing its number of units sold, which reached 1.26 million in the latest quarter. Over the last two years, Packaging Corporation of America’s units sold averaged 8.7% year-on-year growth. Because this number is better than its revenue growth, we can see the company’s average selling price decreased.

This quarter, Packaging Corporation of America grew its revenue by 6% year on year, and its $2.31 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 15.4% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will spur better top-line performance.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Packaging Corporation of America’s operating margin has been trending up over the last 12 months and averaged 14.6% over the last five years. On top of that, its profitability was top-notch for an industrials business, showing it’s an well-run company with an efficient cost structure. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, Packaging Corporation of America’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. We like to see margin expansion, but we’re still happy with Packaging Corporation of America’s performance considering most Industrial Packaging companies saw their margins plummet.

This quarter, Packaging Corporation of America generated an operating margin profit margin of 14%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Packaging Corporation of America’s EPS grew at a spectacular 14.7% compounded annual growth rate over the last five years, higher than its 5.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Packaging Corporation of America’s earnings quality to better understand the drivers of its performance. A five-year view shows that Packaging Corporation of America has repurchased its stock, shrinking its share count by 5.1%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Packaging Corporation of America, its two-year annual EPS growth of 6.7% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Packaging Corporation of America reported EPS of $2.51, down from $2.64 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Packaging Corporation of America’s full-year EPS of $9.90 to grow 17.2%.

Key Takeaways from Packaging Corporation of America’s Q3 Results

We struggled to find many positives in these results. Its EPS missed and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 7.1% to $194 immediately after reporting.

Packaging Corporation of America’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.