Packaging Corp. of America (PKG) PT Raised to $292 at UBS Following Containerboard Price Increase
UBS analyst Anojja Shah raised the price target on Packaging Corp. of America (NYSE: PKG) to $292.00 (from $271.00) while maintaining a Buy rating.
The analyst commented, "PKG recently announced a $140/ton containerboard price increase effective Sep 1. It's an unprecedented number, compared to historical price increases in the $50-70/ton range. However, with 2Q shipments +0.9% y/y (link) and IP's current weather-related outage at Pine Hill, AL (~2% of NA capacity), the market is tight. In this note, we are updating our estimates to include partial realization of the third price increase. As a reminder, this price increase attempt needs to be recognized by Pulp & Paper Week for PKG's box contracts to reprice upward. The relevant PPW pricing print will be on September 18th. We don't add the full $140/ton. SW's third increase is $100/ton and IP's is $80/ton and so we believe negotiations are likely to settle closer to the $80/ton reference point. With 10% of industry capacity removed last year, the producers have pricing power. However, it's the 3rd price increase in six months and we expect pushback. We're already seeing it from independent box manufacturers."