Story
Citi Eyes Strong Q2 for Packaging Sector, Highlights Top Stock Picks
Summary
Citi analysts anticipate a positive second-quarter earnings season for paper and packaging companies, citing stable demand and price hikes. The firm identified Sonoco Products and Crown Holdings among its top picks ahead of the reports.
Analysts at Citi are forecasting a largely positive second-quarter earnings season for the paper and packaging sector, highlighting beverage can and containerboard producers as likely to deliver upbeat results. The firm expects most management teams to reaffirm their full-year 2026 guidance as underlying demand remains steady.
Favorable Sector Outlook
According to a note from the investment bank, recent price increases in containerboard and solid bleached sulfate could lead to optimistic commentary on upcoming earnings calls. Citi's outlook is based on the assessment that demand for most producers is tracking in line with previous expectations, providing a stable backdrop for the quarter.
Top 'Buy'-Rated Picks
Citi highlighted several companies with favorable prospects and valuations heading into their earnings reports:
Ad- Sonoco Products (SON): Ranked as Citi's second-best pick in the sector, the firm projects earnings per share (EPS) of $1.52, ahead of the $1.43 consensus. Analysts noted a compelling valuation at 7.8x next twelve months (NTM) EBITDA and expect the company to reiterate its full-year guidance.
- Crown Holdings (CCK): As the third-ranked pick, Citi forecasts beverage can volumes to increase 4.3% year-over-year. The bank projects an EPS of $2.20 versus a consensus of $2.15, citing a reasonable valuation at 9.0x NTM EBITDA.
- Ardagh Metal Packaging (AMBP): Analysts believe the company could modestly raise its 2026 EBITDA guidance, reflecting a strong first quarter and supportive demand trends. Citi's EPS forecast is $0.06, slightly above the $0.05 consensus.
A Cautious Stance on Valuation
While bullish on several names, Citi maintains a more cautious view where valuation appears full. The firm holds a 'Neutral' rating on Packaging Corporation of America (PKG), despite modeling a strong 11% year-over-year increase in second-quarter EBITDA to $489 million. According to the analysts, the company's valuation at 10.9x NTM EBITDA is considered fair, suggesting more limited upside.
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