PCA-4 Packaging Stocks to Watch Despite Industry Headwinds

Industry Overview - The Zacks Containers - Paper and Packaging industry is experiencing weak demand due to lower consumer spending amid inflation, but pricing actions by industry players are expected to mitigate the impacts of supply-chain disruptions and elevated costs [1][4] - The industry is projected to benefit from rising e-commerce activities and increasing demand for sustainable packaging options driven by environmental concerns [1][5] Key Trends - E-commerce accounted for over 19% of global retail sales in 2023, with revenues expected to reach $4,324 billion by 2025, growing at a CAGR of 8% from 2025 to 2029 [5] - The industry has significant exposure (over 60%) to consumer-oriented markets, ensuring stable demand for packaging solutions across economic cycles [5][6] Challenges - The industry faces challenges from persistent low volumes and high costs, with volume declines attributed to reduced consumer spending and customer destocking [4] - Supply-chain disruptions and increased costs for materials, labor, and transportation have pressured margins, although signs of easing supply-chain issues are emerging [4] Company Insights - **Sonoco Products Company (SON)**: Benefiting from the acquisition of Ball Metalpack, implementing price actions to counter inflation, and focusing on core businesses. Expected to achieve annual EBITDA of$ 1 billion by 2026 [15][16] - Packaging Corporation of America (PKG): Experienced year-over-year growth in earnings and revenues due to higher volumes and pricing. The company is well-positioned to benefit from strong e-commerce demand [19][20] - Amcor plc (AMCR): Actively investing in growth areas and has entered a merger agreement with Berry Global Group, expected to yield $650 million in synergies by the third year post-merger [22][23] - AptarGroup (ATR): Reported growth in both top and bottom lines, driven by demand in the pharma and beauty segments, and focuses on acquisitions to expand its technology and product offerings [25][26] Performance Metrics - The Containers - Paper and Packaging industry has underperformed the S&P 500, gaining 9.6% compared to the S&P 500's 21.8% growth over the past year [10] - The industry is currently trading at a forward 12-month EV/EBITDA ratio of 17.97, higher than the S&P 500's 13.96 and the Industrial Products sector's 19.85 [12][14]