Packaging Corporation of America (NYSE: PKG) fell short of the market’s revenue expectations in Q1 CY2026, but sales rose 10.6% year on year to $2.37 billion. Its GAAP profit of $1.91 per share was 9.4% below analysts’ consensus estimates.

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Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “We achieved a first quarter record in shipments per day in our legacy corrugated operations. We saw continued demand improvement which, together with improved mix, drove our strong earnings performance for the quarter. Our containerboard mills performed exceptionally well both in terms of production and efficiency, which helped us mitigate the effects of higher freight, recycled fiber and other input costs as well as the weather challenges we faced earlier in the quarter. We continued to make good progress on the integration of our acquired Greif business, and significantly reduced inventories on hand at the corrugated operations. With strong demand and second quarter maintenance outages at five of our containerboard mills, we will need to continue to run the mill system at full capacity to support our containerboard needs. Our Paper segment exceeded our expectations on sales volume and we began to implement our previously announced price increases, driving high margins and profitability. I am very proud of the performance of our people across the entire business, achieving commercial and operating success that is evident in our results.”

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

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Packaging Corporation of America grew its sales at a mediocre 6.4% compounded annual growth rate. This was below our standard for the industrials sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Packaging Corporation of America’s annualized revenue growth of 8.7% over the last two years is above its five-year trend, suggesting some bright spots.

We can better understand the company’s revenue dynamics by analyzing its number of units sold, which reached 1.4 million in the latest quarter. Over the last two years, Packaging Corporation of America’s units sold averaged 3.4% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, Packaging Corporation of America’s revenue grew by 10.6% year on year to $2.37 billion but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 10.3% over the next 12 months, an improvement versus the last two years. This projection is commendable and suggests its newer products and services will spur better top-line performance.

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Operating Margin

Packaging Corporation of America has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.2%. 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.

Analyzing the trend in its profitability, Packaging Corporation of America’s operating margin decreased by 5.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Packaging Corporation of America generated an operating margin profit margin of 10.6%, down 2.5 percentage points year on year. Since Packaging Corporation of America’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Packaging Corporation of America’s EPS grew at 10% compounded annual growth rate over the last five years, higher than its 6.4% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

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 5.8%. 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 1.3% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q1, Packaging Corporation of America reported EPS of $1.91, down from $2.26 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 $8.23 to grow 27.7%.

Key Takeaways from Packaging Corporation of America’s Q1 Results

It was encouraging to see Packaging Corporation of America beat analysts’ EBITDA expectations this quarter. On the other hand, its revenue missed and its adjusted operating income fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $203.61 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. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).