Packaging Corp Of America. (NYSE:PKG) stock fell 5.74% (As on April 25, 11:32:33 AM UTC-4, Source: Google Finance) after the company lags analysts’ estimates for both bottomline and topline for the first quarter of FY 23. In the Packaging segment, total corrugated products shipments and shipments per day were down (12.7%) compared to the first quarter of 2022. Containerboard production was 1,086,000 tons, and containerboard inventory was down 36,000 tons from the first quarter of 2022 and up 6,000 tons compared to the fourth quarter of 2022. In the Paper segment, sales volume was down 23,000 tons from the first quarter of 2022 and down 6,000 tons compared to the fourth quarter of 2022.

PKG in the first quarter of FY 23 has reported the adjusted earnings per share of $2.20, missing the analysts’ estimates for the adjusted earnings per share of $2.27, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue of $1.98 billion in the first quarter of FY 23, missing the analysts’ estimates for revenue by 5.06%.

Moreover, Packaging segment demand was below the expectations for the quarter. Consumer spending continues to be negatively impacted by higher interest rates and persistent inflation along with consumer buying preferences skewed more towards services versus durable and non-durable goods. After a strong start in January, consumer spending was increasingly softer as the quarter progressed, similar to the box shipments during the quarter. In addition, the PMI index indicates manufacturing has remained in contraction territory for the last five months and continued to decline. The company ran the system in a very cost-effective manner based on this lower demand, and the company managed containerboard inventories to the targeted weeks-of-inventory supply. Price and mix in the Packaging segment are still above last year’s levels, although the positive impact was lower than expected primarily due to a price decrease in the published benchmark containerboard grades after the guidance was provided. However, even with these unanticipated market headwinds, the company was able to offset most of the negative impact through the cost management and process efficiency optimization efforts at the mills and corrugated products plants, along with energy prices being lower than expected. The Paper segment had outstanding results driven by continued realization of the previously announced price increases and the benefits of the newly optimized paper business.

The company expects second quarter earnings to be of $1.96 per share.