PCA Earnings: Robust Packaging Demand and Higher Pricing Drive Impressive Growth

No-moat-rated Packaging Corp. of America reported strong third-quarter results that exceeded our expectations. Net sales climbed almost 13% year over year, driven by robust packaging demand. PCA reported a 15% consolidated operating margin in the quarter, up 160 basis points from a year ago, as it benefited from higher volume and pricing. We had expected an uptick in demand as inventory destocking headwinds have abated and customers returned to more normalized purchasing patterns, but the level of demand in the quarter surpassed our initial forecasts. As such, we've raised our fair value estimate to $140 per share from $130.