Packaging Corp Earnings: Delayed Index Price Increases Weigh Down an Otherwise Strong Quarter

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.