On Nov 15, we downgraded our recommendation on packaging
) to Underperform. Our view reflects the company's increased
exposure to real estate market, higher raw material costs and
challenging macroeconomic conditions.
KAPSTONE PAPER (KS): Free Stock Analysis
MEADWESTVACO CP (MWV): Free Stock Analysis
STORA ENSO -ADR (SEOAY): Get Free Report
ORCHIDS PAPER (TIS): Free Stock Analysis
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Why the Downgrade?
MeadWestvaco, on Oct 29, reported third-quarter 2013 adjusted
earnings from continuing operations of 49 cents per share, up 26%
year over year. However, it fell short of the Zacks Consensus
Estimate of 52 cents.
Weak performance of two important segments - Food & Beverage
and Home, Health & Beauty affected the results. Revenues and
profit decreased year over year in both segments. Food and
beverage packaging continues to be impacted by the challenging
global economic climate, particularly in Europe.
In October, MeadWestvaco announced its intention to sell U.S.
forestland and create a new partnership for real estate
development in the Charleston, S.C., region. This is an important
step towards strategic transformation. However, exposure to the
real estate market will increase volatility in this highly
competitive and cyclical market.
In addition, higher raw material costs - mainly resin, transitory
costs related to the exit of the Folding Carton business,
challenging macroeconomic conditions and depreciation of the Real
against the U.S. Dollar will act as deterrents.
Following the release of third-quarter results, the Zacks
Consensus Estimates for 2013 and 2014 for MeadWestvaco decreased
6.6% and 10.7%, respectively, to $1.27 per share and $1.76 per
share, respectively. With earnings estimates for both 2013 and
2014 moving downwards, MeadWestvaco now holds a Zacks Rank #5
Other Stocks to Consider
Other stocks in the same sector with favorable Zacks Rank are
KapStone Paper and Packaging
) with a Zacks Rank #1 (Strong Buy); and
Stora Enso Oyj
) both carrying a Zacks Rank #2 (Buy).