Several packaging companies have reported an upturn in March and April orders. While this data point is not definitive enough to call a bottom to the economy, it burnishes the bull case on the U.S. economy, and thus the stock market.
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Two companies have reported that box shipment trends, which many investors watch for a sign of an improving economy, have shown double-digit percent increases sequentially from previous months. Packaging Corp. of America (NYSE:PKG) said during its recent earnings conference call that bookings of corrugated products were up in April.
"April has started out much stronger for us with corrugated product bookings for the first 10 days up almost 15% over March," said Paul Stecko, the company's CEO. Later during the call, Stecko said, "It's like somebody turned the light switch on."
Temple Inland (NYSE:TIN) confirmed this positive shipments trend. The company reported that box shipment volumes were down 4% in the first quarter on an average per week basis, but April shipments were up 4% sequentially so far from March.
Ball Corp. (NYSE:BLL) manufactures metal and plastic packaging for several different industries including beverage, food and household products. The company said during its earnings conference call that "recent volume trends indicate a pick-up in customer and consumer demand." March 2009 food can volumes increased by 15% over March 2008. Pactiv Corp. (NYSE:PTV), which also makes packaging materials, said that "volume in the quarter was better than what we expected, but more importantly, the trend of shipments seems to be going in the right direction." Management also indicated that April was doing better than March for volume trends. (Learn more about the indicators that experienced professionals use to evaluate the market; read Economic Indicators Tutorial and Economic Indicators For The Do-It-Yourself Investor.)
Although these trends are certainly a positive development, it is far from certain that an economic recovery is under way. These trends may just represent companies restocking boxes or other inventory after a severe cut in orders in previous months. Also, the order trends from Pactiv and Ball Corp. are less encouraging as these companies sell packaging for items like food, beverages and beer, which are considered staple items, and thus less cyclical and not truly representative of an improving economy.
These trends also contradict data from statistical surveys. The latest survey from the Manufacturers Alliance/MAPI on April 16 said that U.S. manufacturing would probably decline over the next three to six months. The survey measures participants' shipments, backlogs, inventories and profit margins. The next data point that investors will be looking for will be from International Paper (NYSE:IP), which releases earnings April 30. International Paper is the largest producer of containerboard and boxes and will provide an excellent snapshot into the global economy.
Selective evidence of an economic recovery is emerging from companies reporting earnings. Although these data points are in no way conclusive, they are empowering bulls in the stock market and supporting a stabilization in the equity markets.
These companies may not be flashy, but they offer investors structure and diversification; see A Guide To Consumer Staples.