Chicago, IL – May 8, 2025 – Today, Zacks Equity Research Brambles BXBLY, Amcor plc AMCR and AptarGroup ATR.
Link: https://www.zacks.com/commentary/2464351/3-packaging-stocks-to-keep-an-eye-on-despite-industry-headwinds
The Zacks Containers - Paper and Packaging industry has been facing weak demand due to lower consumer spending amid an inflationary backdrop. Pricing actions implemented by the industry players will help offset the impacts of supply-chain disruptions and elevated costs and tariffs. The industry will eventually gain support from rising e-commerce activities and solid demand for sustainable and eco-friendly packaging options due to increasing environmental concerns.
Companies like Brambles, Amcor plc and AptarGroup are set to gain from their efforts to capitalize on these trends.
The Zacks Containers - Paper and Packaging industry comprises companies that manufacture paper and plastic packaging products. The packaging solutions provided by the industry help protect and preserve products, extend the shelf life and cut down on wastage and loss across the wide and lengthy range of distribution channels. The products range from containerboard and corrugated packaging to flexible and rigid plastic packaging.
Some companies manufacture dispensing pumps, closures, aerosol valves and applicators for the beauty, personal, home care and healthcare markets. The industry serves a wide array of markets, including food, beverage, food services and other consumer products, such as beauty, personal care and home care. They also cater to the chemical, agribusiness, medical, pharmaceutical, electronics and industrial markets, to name a few.
Low Volumes, High Costs & Tariffs Pose Challenges: The industry has been witnessing volume declines due to lower consumer spending on goods, reflecting the inflationary scenario. Also, customers have been lowering their inventory, which had built up in response to high demand and supply-chain issues. This had an impact on the top-line performances of packaging companies. They also encountered supply-chain disruptions and higher material, labor and transportation costs.
The imposition of tariffs adds to the margin pressure. The companies are planning to implement pricing strategies and cost-reduction actions to negate these headwinds. They are also streamlining their operations and taking steps to realign with high-growth key markets to bolster their performance.
E-commerce Acts as a Key Catalyst: With rising e-commerce activities over the past few years, along with the effect of the pandemic, the importance of packaging has increased manifold, as it maintains the integrity and durability of a product. Packaging also helps withstand the complex product delivery process. In 2023, e-commerce accounted for more than 19% of retail sales worldwide.
According to Statista, global e-commerce revenues are expected to reach $4.3 trillion in 2025 and witness a compound annual growth rate (CAGR) of 8% between 2025 and 2029. Turkey is expected to lead, followed by Brazil and India. By 2026, the U.S online retail market is forecast to surpass the $1.5 trillion mark. The China e-commerce market is expected to attain $2 trillion in 2027.
These solid projections bode well for the Containers - Paper and Packaging industry. Also, the industry has significant exposure (more than 60%) to consumer-oriented end markets, such as food and beverages, as well as healthcare. Demand for packaging applications remains fairly stable for these sectors across economic cycles, thus ensuring consistent demand for packaging solutions.
Demand for Eco-Friendly Packaging to Aid Industry: The preference for environmentally friendly biodegradable packaging materials is witnessing a steady rise globally, courtesy of customers' increasing awareness of environmental issues. The industry is constantly striving to meet the same by adopting the latest technology and bringing innovative products. Industry players have begun incorporating recycled content into production methods. By maximizing recycling, the industry can implement environmentally and economically sustainable production methods.
The Zacks Containers - Paper and Packaging industry is a 12-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #149, which places it at the bottom 39% of the 246 Zacks industries.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates weak prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Despite the dim near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. However, it is worth taking a look at the industry's shareholder returns and current valuation first.
The Containers - Paper and Packaging industry has underperformed the S&P 500 and the sector over the past year. The industry has declined 13.3% against the S&P 500's growth of 9.1%. The Industrial Products sector has, meanwhile, fallen 7.7%.
On the basis of the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Containers - Paper and Packaging companies, we see that the industry is currently trading at 19.76X compared with the S&P 500's 12.88X and the Industrial Products sector's forward 12-month EV/EBITDA of 19.30X.
Over the last five years, the industry traded as high as 24.25X and as low as 16.28X, the median being 20.60X.
Brambles: The company recently reported results for the nine months of fiscal 2025, with revenues improving 1% year over year to $4.9 billion, attributed to pricing actions and increased volumes driven by net new business wins. The company expects revenue growth to be between 4% and 5% in fiscal 2025. Underlying Profit growth is projected at 8-11%. Brambles expects to generate strong operating leverage, driven by ongoing supply chain and asset productivity initiatives as well as overhead cost control measures.
The company maintains its dividend payout policy of 50-70% of underlying profit. It is delivering cost savings across its operations linked to network optimization, operational excellence and procurement initiatives. In addition to driving financial gains, its transformation activities have strengthened its competitive advantage. It is also advancing its digital transformation plans by expanding its advanced data analytics solutions, which are driving improvements in customer experience, commercial decision-making and asset productivity. BXBLY shares have gained 12% in the past three months.
The Zacks Consensus Estimate for the Sydney, Australia-based company's ongoing year's earnings has remained unchanged over the past 30 days. The estimate indicates year-over-year growth of 6%. BXBLY currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
AptarGroup: The company's Pharma segment has been witnessing healthy demand for its proprietary drug delivery systems used for allergic rhinitis, emergency medicines and central nervous system therapies, as well as asthma, COPD and ophthalmic treatments. The Beauty segment has seen higher sales in personal and home care products. Backed by its efforts to bring innovative products into the market, the company remains the preferred choice for renowned brands worldwide.
Focus on acquisitions to expand the scope of technologies, geographic presence and product offerings will also aid growth. Additionally, the company's strong presence in resilient markets, such as chronic disease medications and essential consumer staples with consistent demand regardless of economic uncertainty, helps ensure long-term stability. ATR shares have gained 5.3% in the past three months.
The Zacks Consensus Estimate for AptarGroup's fiscal 2025 earnings has moved up 2.5% in the past 30 days and indicates year-over-year growth of 1.2%. This Crystal Lake, IL-based company has a trailing four-quarter earnings surprise of 7.3%, on average. The company has an estimated long-term earnings growth rate of 6.2% and a Zacks Rank of 2 at present.
Amcor: The company recently closed the merger with Berry Global Group, Inc., strengthening its position as a global leader in consumer and healthcare packaging solutions. In fiscal 2026, it expects to realize $260 million in pre-tax synergies, driving approximately 12% adjusted EPS accretion.
Over the next three years, Amcor projects $650 million in total benefits from cost savings, growth opportunities and financial synergies, which are anticipated to deliver more than 35% EPS accretion by the end of FY28. With projected annual cash flow exceeding $3 billion by FY28, the company will be well-positioned to invest in organic growth, pursue strategic M&A and return capital to shareholders through attractive dividends and share repurchases. Amcor shares have dipped 8.6% in the past three months.
The Zacks Consensus Estimate for Amcor's ongoing year's earnings has moved up 1.4% in the past 60 days. The estimate indicates year-over-year growth of 5.7%. AMCR has an estimated long-term earnings growth rate of 5% and a Zacks Rank # 3 (Hold).
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