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

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.