While the paper and packaging industry might not seem quite as exciting as the glamorous world of high tech or high finance, it is often a closely watched sector by economists and market strategists at the big Wall St. firms. The reason is simple: solid earnings and growth at companies in the sector often mirror solid consumer and business growth. With consumer spending representing 70% of gross domestic product, this is a sector to keep an eye on.
Deutsche Bank A.G. (NYSE: DB) has issued a new research report noting that comments from timber and wood products companies have been surprisingly upbeat, while things are more checkered in paper and packaging. In nonpaper packaging, most of their coverage universe posted sluggish fourth-quarter results and softer-than-expected first quarter 2013 guidance. However, the analysts see stronger-than-expected 2013 free cash flow targets and the potential impact of targeted restructuring moves bolstering most packaging stocks. The top picks at Deutsche Bank for 2013 are as follows.
Owens-Illinois Inc. (NYSE: OI) manufactures and sells glass container products primarily in Europe, North America, South America and the Asia-Pacific. Deutsche Bank has a Buy rating with a price target of $28, which is the same as the Wall St. consensus target.
International Paper Co. (NYSE: IP) is the largest and most globally oriented North American paper company. Deutsche Bank’s price target of $50 compares to the consensus target of $48. International Paper also pays a 2.80% dividend.
P.H. Glatfelter Co. (NYSE: GLT) manufactures and sells specialty papers and fiber-based engineered materials in the United States and internationally. The Deutsche Bank price target on this buy-rated stock is $21, while the consensus estimate is in line at $21.50.
Berry Plastics Group Inc. (NYSE: BERY) engages in the manufacture and marketing of plastic consumer packaging and engineered materials in the United States, Canada, Mexico, Belgium, Australia, Germany, Brazil, Malaysia and India. Berry Plastics gets a Buy rating and a $21 price target. The Thomson/First Call estimate is essentially in line at $21.50.
Wausau Paper Corp. (NYSE: WPP) manufactures, converts and sells paper and paper products in the United States and internationally. The company operates in two segments, Tissue and Paper. The last Deutsche Bank top pick for 2013, this buy-rated stock has a $13 price target that is substantially higher than the consensus target of $10.50.
In an improving economy, investors looking to have some exposure to the paper and packaging sector have five solid names to choose from Deutsche Bank. While the sizzle may not be there, it looks like the profits may be.