Packaging Corp Earnings: Strong Volume Gains Impress but Index Pricing Remains a Challenge

No-moat-rated Packaging Corp of America reported solid first-quarter results that came with few surprises. Net sales were roughly flat year over year, as a slight decline in packaging revenue was offset by top-line growth in the firm's paper business. Both segments saw solid volume gains in the quarter, but pricing headwinds persisted, leading an almost 400 basis point decline in consolidated operating margins. While destocking trends have moderated significantly, Packaging Corp and its peers still face lower index pricing, which has weighed on margins. We've raised our fair value estimate to $123 from $121 due to the time value of money.