Clearwater Paper (CLW) earnings growth is likely to remain "limited" by persistent "oversupply" in the solid bleached sulfate, or SBS market, with weak supply-demand fundamentals expected to continue weighing on pricing and margins, BofA Securities said in a report Thursday.

Clearwater's "transformation into a pure-play" SBS producer following its tissue business exit and the Augusta mill acquisition simplifies its business, but the company remains exposed to a "challenged industry backdrop" and limited near-term catalysts, the report said.

About 500,000 tons of new SBS capacity added in the second half of 2025 has kept the market oversupplied, while announced capacity closures remain insufficient to restore balance, according to the report. The firm also expects the company's free cash flow to fall below management's guidance.

BofA initiated coverage of Clearwater Paper with a neutral rating and a $19 price target, adding the shares appear fairly valued given forecast risks and leverage concerns.

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