Company Reports

No-moat-rated Packaging Corp of America reported solid second-quarter results as end-market demand continued to recover. Net sales in the quarter rose over 6% year over year driven by gains in both segments. Conversely, operating margins contracted over 100 basis points to 13.3%, largely due to lower selling prices and higher operating costs. Nevertheless, we expect Packaging Corp will maintain its momentum through the end of the year as the company capitalizes on strong end-market demand and previously announced price increases are realized. As such, we've raised our fair value estimate to $130 from $123.

Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. The majority of the company's containerboard is used internally to produce corrugated packaging, with the remainder sold to external customers. A decade of consolidation in the corrugated packaging industry allowed Packaging Corp to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. The majority of the company's containerboard is used internally to produce corrugated packaging, with the remainder sold to external customers. A decade of consolidation in the corrugated packaging industry allowed Packaging Corp to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

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.

No-moat-rated Packaging Corporation of America reported strong fourth-quarter results as the company finished the year on a high note. During the quarter, the company benefited from additional improvements in end market demand and continued easing in destocking activities that had weighed heavily on volumes for much of the year. Management noted that demand improved through the quarter and has carried over into January, which is an encouraging development given the challenges experienced in 2023. As such, we've raised our fair value estimate to $121 from $114 per share due to increased near-term revenue and profitability in our forecast.

Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. The majority of the company's containerboard is used internally to produce corrugated packaging, with the remainder sold to external customers. A decade of consolidation in the corrugated packaging industry allowed Packaging Corp to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. The majority of the company's containerboard is used internally to produce corrugated packaging, with the remainder sold to external customers. A decade of consolidation in the corrugated packaging industry allowed Packaging Corp to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

No-moat-rated Packaging Corp of America reported solid operating results during their third quarter as inventory destocking moderated and resulted in better than anticipated shipments relative to the first half of the year. Nonetheless, continued macroeconomic headwinds have resulted in pricing declines, which drove revenue down roughly 9% year over year as packaging and paper both saw declines. While we expect this trend will persist through the end of the year, we are encouraged by the slowdown in inventory destocking and cost savings experienced in the quarter. As such, we've raised our fair value estimate to $114 from $113 per share due to increased near-term profitability in our forecast.

No-moat-rated Packaging Corp of America reported mixed operating results for the second quarter as lower volumes weighed on top-line growth, but cost-management initiatives provided some margin relief. Revenue fell almost 13% year over year, largely driven by a double-digit decline in both packaging and paper volumes amid softening consumer demand. Packaging Corp. continues to make operational improvements that led to additional cost savings in the quarter, but macroeconomic concerns weigh on consumer spending and set up a challenging second half of the year. Nevertheless, we've raised our fair value estimate to $113 from $108 per share due to increased near-term profitability in our forecast.

Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. The majority of the firm’s containerboard is used internally to produce corrugated packaging, with the remainder sold to external customers. A decade of consolidation in the corrugated packaging industry allowed Packaging Corp to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. The majority of the firm’s containerboard is used internally to produce corrugated packaging, with the remainder sold to external customers. A decade of consolidation in the corrugated packaging industry allowed Packaging Corp to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

Packaging Corp of America reported underwhelming first-quarter results as a favorable mix in packaging was more than offset by a double-digit decline in volume. The packaging business continues to struggle as consumer spending slows amid heighted economic uncertainty. That said, Packaging Corp's small paper business posted strong results for the quarter, benefiting from its previously announced price increases and a much smaller decline in volume. Despite cost management initiatives, rising operating costs continued to weigh on the firm, with consolidated operating margins contracting 300 basis points from a year ago to 13.7%. We expect some improvement in operating costs during the year, but Packaging Corp faces an uphill battle as demand remains constrained. We've decreased our fair value estimate to $108 per share from $110 due to a decrease in our near-term revenue and profitability forecast.

No-moat-rated Packaging Corp of America reported fourth-quarter results that were largely in line with our expectations. Demand for its corrugated packaging products continued to face pressure amid heightened economic uncertainty. That said, Packaging Corp’s stringent cost management and previously announced paper price increases partially offset lower volumes in the quarter. Consolidated operating margins contracted 280 basis points from a year ago to 14.6%, largely due to higher operating costs. We are maintaining our fair value estimate of $110 per share.

Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. The majority of the firm’s containerboard is used internally to produce corrugated packaging, with the remainder sold to external customers. A decade of consolidation in the corrugated packaging industry allowed Packaging Corp to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

We are initiating coverage on Packaging Corporation of America with a fair value estimate of $110 per share and a no-moat rating. While we maintain our view that the firm does not benefit from an economic moat, we have upgraded our trend rating to stable from negative previously. Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. A decade of consolidation in the corrugated packaging industry allowed the firm to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

Packaging Corp of America manufactures packaging products and uncoated freesheet, or UFS, paper. It accounts for roughly 10% of the North American containerboard market and is the third-largest producer. The majority of the firm’s containerboard is used internally to produce corrugated packaging, with the remainder sold to external customers. A decade of consolidation in the corrugated packaging industry allowed Packaging Corp to raise prices aggressively, but increased competitive intensity from legacy paper producers has limited pricing power in recent years.

We are dropping coverage of Packaging Corp. of America. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

PCA's fourth quarter demonstrated similar demand trends to those we've seen throughout the rest of 2020. Holiday sales further shifted online, with many Americans hunkered down to wait out the coronavirus epidemic. Rising e-commerce volumes were a boon to PCA's box business, where quarterly volumes climbed 9% over the prior year. In contrast, fewer office workers and more remote learning drastically reduced demand for copy paper--paper volumes declined 34% versus last year's fourth-quarter. Although PCA's annual packaging results came in ahead of our expectations, our long-term outlook for the company has not materially changed. We've raised our fair value estimate to $89 per share from $85, principally due to time value of money effects. Our no-moat rating is unchanged. Shares look overvalued at present.

A decade of consolidation in the corrugated packaging industry has seen Packaging Corp. of America and its peers push more aggressively on prices, resulting in a period of sustained high margins. PCA played its part in the trend with the 2013 acquisition of Boise, boosting its market share to 10% in the process. We expect increased competitive intensity to diminish profitability for PCA and its peers in the long run. Thinning margins in corrugated packaging, which accounts for nearly 80% of PCA's sales, are likely to weigh on consolidated profit growth.