Packaging Corp of America Remains the Star of the Containerboard Industry, but Shares Look Expensive

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.