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Packaging Corp of America PKG

Rating as of

Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Strong Box Sales Offset Weak Paper Sales in Packaging Corp. of America's Fourth Quarter

Charles Gross Equity Analyst

Analyst Note

| Charles Gross |

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.

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Company Profile

Business Description

Packaging Corp. of America is the fourth- largest containerboard and corrugated packaging manufacturer in the United States. It produces roughly 4 million tons of containerboard annually. The company's share of the domestic containerboard market is about 10%. PCA differentiates itself from larger competitors by focusing on smaller customers and operating with a high degree of flexibility.

Contact
1 North Field Court
Lake Forest, IL, 60045
T +1 847 482-3000
Sector Consumer Cyclical
Industry Packaging & Containers
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 15,200

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