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1/23/2018 | 2 MINUTE READ

Projections Point to Robust Growth in Packaging

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Revenues for publicly traded firms in plastics packaging and containers increased by more than 7% in the third quarter of 2017 compared with a year earlier. The growth trend is up for this year and next.

Directly measuring packaging and containers is a difficult task due to the permeation of such products in everyday consumer activities, as well as along many—if not most—supply chains in many industries. For this reason, examining broad measures of the economy, such as consumer spending, industrial production, and capacity utilization, acts as a proxy for estimating the direction and rate of change in the packaging and container industry.

Annual measures of industrial production of the packaging and plastics industry—last measured for 2016—can tell you where the industry has been in the prior year, or even two. In response, Gardner Intelligence has built customized tools that collect and analyze the quarterly business results of publicly traded firms in the plastics packaging and container industries to provide those serving this industry with more up-to-date information.

Examining the financial data of U.S. publicly traded packaging and container manufacturers of plastic and rubber, revenues for the group grew 7.1% between the third quarter of 2016 and the same period in 2017. Using the forecast projections from Wall Street brokerages for these same firms, revenues are expected to increase 2.6% and 6.1 % respectively in Q3 2018 and Q3 2019 before accounting for inflation. Taking an extended look at inflation-adjusted (“real”) historical and forecasted revenues for the period 2000 to 2020, one will see that the growth rate of real revenues increased around 2012 and is projected to continue to grow at that faster rate through at least early 2019.

(Projected revenues, starting in 4Q 2017, are from Wall Street estimates. All values are indexed, with “100” representing the average level of revenues in 2015 among Gardner’s list of plastics packaging and container firms for which data are available. All figures have been adjusted for inflation, with forecasted figures adjusted by a 2.5% annual expected inflation rate.)

Additionally, examining Wall Street consensus projections for Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), we see that these same packaging firms are predicted to see EBITDA growth of 5.1% between Q3 2017 and Q4 2018 and an impressive 11.1% between Q3 2018 and Q4 2019.

Gardner attributes these robust forecasts to the expected strength of the U.S. and world economy, driven by strong consumer spending and low unemployment over the forecasted period.

ABOUT THE AUTHOR: Michael Guckes is the chief economist for Gardner Business Intelligence, a division of Gardner Business Media (Cincinnati, OH, US). He has performed economic analysis, modeling and forecasting work for nearly 20 years among a wide range of industries. Michael received his BA in political science and economics from Kenyon College and his MBA from The Ohio State University. mguckes@gardnerweb.com


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