Q3’26 US packaging previews: Costs continue to weigh on FY’26 but pricing boosts 2027.

In this note, we (1) provide our view into Q3'26 earnings, (2) revise our forecasts to reflect a higher cost environment but, in some instances, also a better pricing environment, (3) provide a cost sensitivity to OCC and diesel prices, (4) take stock of changes in supply/demand in the respective grades and (5) reflect on the risk/reward of each stock at current valuations. We reiterate our Overweight ratings on Packaging Corporation of America, Smurfit Westrock and International Paper. Concurrent to this note, we upgrade our recommendation on GPK from Neutral to Overweight. As a result of persistent cost inflation, we have reduced our Q3'26 EBITDA expectations for each company by ~1%, but we remain within the guided ranges provided at Q2'26 earnings. Cost inflation has resulted in FY'26 EBITDA cuts of 1-3% for all four. After factoring in higher costs and higher than expected price increases, we have increased our 2027 EBITDA estimates for SW, IP and PKG by 3.3%, 2.3% and 1.3%, respec