3 Packaging Stocks Likely to Continue Their Winning Streaks in 2025

The packaging industry started 2024 on a weak note, facing subdued demand as customers curtailed spending amid an inflationary backdrop and high interest rates. Supply-chain disruptions and elevated costs added to the difficulties. To maintain margins, companies implemented cost-cutting measures and pricing strategies. However, the situation improved later in the year, with companies reporting volume recovery as pressures on customers abated. Despite the challenging backdrop, stocks like Packaging Corporation of America PKG, International Paper Company IP and AptarGroup ATR managed to stand out and have outperformed the S&P 500 year to date. With positive estimate revisions and robust growth expectations, these companies are poised to sustain their momentum into 2025.Looking Back at the Packaging Sector in 2024Started 2024 With Weak Volumes, Recovers Later in the Year: The packaging industry faced weak demand throughout most of 2024 as inflation and high interest rates dampened consumer spending. Industry participants noted that customers had been lowering their inventory levels. However, as the year progressed, there was a gradual improvement in volumes as customer destocking ended. Spending also picked up with the Fed lowering interest rates and inflationary pressures eased. Notably, consumer spending increased 3.7% in the third quarter, the highest since early 2023. Notably, consumer spending increased 3.7% in the third quarter, the highest since early 2023.Contraction in the Manufacturing Sector Acts as a Spoilsport: The Institute for Supply Management’s manufacturing index had languished in contraction territory for 10 months this year (barring an uptick of 50.3% in March). This slowdown in manufacturing, in turn, impacted the performance of the packaging companies that cater to the sector.Cost Cutting & Other Strategies to Sustain Margins: The packaging sector was not immune to rampant inflation, and witnessed higher material and transportation costs. Labor shortages and supply-chain disruptions added to the challenges. The companies have been implementing cost-reduction actions, streamlining their operations to sustain margins in the wake of weak demand. They have also been taking steps to realign with high-growth key markets to bolster their performances. Improvements in supply chains later in the year brought some relief.E-commerce & Stable Demand for Food Support Demand: With rising e-commerce, packaging has gained the utmost importance, as it helps maintain the integrity of the product and withstand the complexities of delivery. Retail e-commerce sales for 2024 are estimated to exceed $4.1 trillion worldwide.Also, the packaging industry has significant exposure (more than 60%) to consumer-oriented end markets, such as food and beverages, and healthcare. Demand for packaging applications remains fairly stable for these sectors across economic cycles, thus ensuring consistent demand for packaging solutions.The expansion of meal kit businesses and food delivery services has also been contributing to increased packaging demand. This trend is partly driven by millennials and younger consumers who frequently use these services.Packaging Stocks’ Future Rides on E-Commerce & SustainabilityAccording to Statista, global e-commerce sales are expected to see a compound annual growth rate (CAGR) of 9.5% between 2024 and 2029. Turkey is expected to lead the retail e-commerce development with a CAGR of 11.6% over this period, closely followed by Brazil and India. The U.S. retail e-commerce market is expected to cross the $1.5-trillion mark in 2026 and grow, seeing a CAGR of 9% between 2024 and 2029. The China e-commerce market surpassed $1 trillion in 2020. The same is forecast to double in 2027.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. Notably, customers are willing to pay more for sustainable packaging.The global sustainable packaging market, including sustainable glass, plastic, metal and paper packaging solutions, was estimated to be worth $292.71 billion in 2024. The same is projected to reach $423.56 billion in 2029.3 Packaging Stocks Poised to Perform Well in 2025We have taken the help of the Zacks Stocks Screener to shortlist three packaging stocks that have outperformed the S&P 500 this year. These stocks currently carry a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and have upbeat earnings growth projections for the next year. You can see the complete list of today’s Zacks #1 Rank stocks here.YTD Stock Price Performance of PKG, ATR & IP versus S&P 500 Image Source: Zacks Investment Research Packaging Corp: The company saw volume growth in the last five quarters in the packaging segment despite the weakness in the overall industry, which is commendable. Its paper segment has also witnessed volume growth in the first three quarters of 2024. PKG achieved all-time quarterly records for containerboard production, total box shipments and shipments per day in the third quarter of 2024. The company maintains a balanced approach toward capital allocation to boost growth and maximize shareholder returns. Over the past several years, PKG has made extensive capital investments in its packaging segment to improve productivity and efficiencies at containerboard mills and corrugated products facilities.The Zacks Consensus Estimate for PKG’s earnings for 2025 has been revised upward by 6% in the past 90 days. The estimate for 2025 indicates year-over-year growth of 22.8%. PKG has a trailing four-quarter earnings surprise of 8.6%, on average. The Lake Forest, IL-based company has an estimated long-term earnings growth rate of 7.9%. The company currently flaunts a Zacks Rank #1. The PKG stock has gained 42.7% year to date and outperformed the S&P 500’s 27.8% rise.See the Zacks Earnings Calendar to stay ahead of market-making news.AptarGroup: The company’s Pharma segment has been witnessing healthy demand for its proprietary dispensing devices used for nasal decongestants, eye care, cough and cold, and saline rinses, as well as allergic rhinitis, emergency medicines and depression therapies. Demand for elastomeric components used for biologics continues to be strong. The Beauty segment has also been seeing higher sales in prestige and mass fragrances, along with sales growth in skin care and color cosmetic solutions. Backed by its efforts to bring innovative products into the market, the company remains the preferred choice for renowned brands worldwide. Its focus on acquisitions to expand the scope of technologies, geographic presence and product offerings will also aid growth. The Zacks Consensus Estimate for AptarGroup’s fiscal 2025 earnings has moved 1% north in the past 90 days. The figure indicates year-over-year growth of 12.3%. This Crystal Lake, IL-based company has a trailing four-quarter earnings surprise of 6.1%, on average. The company has an estimated long-term earnings growth rate of 10.8% and a Zacks Rank #3 at present. The ATR stock has gained 31.9% year to date and outperformed the S&P 500’s 27.8% growth. International Paper:  The company has been optimizing cost structure, making investments to strengthen its competitive and strategic assets, and reducing complexity in the business.  It is adding capacity to its existing plants and investing in plants that will help it capitalize on the demand for corrugated and containerboard packaging, going forward. International Paper’s pending acquisition of DS Smith marks a strategic move to strengthen its corrugated packaging business in Europe and prioritize sustainable packaging. The buyout is expected to be accretive to IP's earnings in the first year of closure and provide at least $514 million of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following the closure. The acquisition is expected to close by the first quarter of 2025.This Memphis, TN-based entity has a trailing four-quarter earnings surprise of 28.9%, on average. The Zacks Consensus Estimate for IP’s 2025 earnings has moved up 12.5% over the past 60 days. The estimate suggests year-over-year growth of 152.4%. International Paper currently carries a Zacks Rank #3. The IP stock has gained 52.8% year to date and outperformed the S&P 500’s 27.8% rise.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report International Paper Company (IP): Free Stock Analysis Report Packaging Corporation of America (PKG): Free Stock Analysis Report AptarGroup, Inc. (ATR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks