On Apr 19, we maintained our Neutral recommendation on global
), based on expected benefits from its new products, acquired
businesses, profitable growth strategies and expansion in Brazil;
offset by concerns regarding lower first quarter earnings due to
higher start-up expenses for the expansion in Brazil and lower
earnings from land sales as well as the situation in Europe.
BERRY PLASTICS (BERY): Free Stock Analysis
GRAPHIC PKG HLD (GPK): Free Stock Analysis
MEADWESTVACO CP (MWV): Free Stock Analysis
PACKAGING CORP (PKG): Free Stock Analysis
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MeadWestvaco reported fourth-quarter 2012 adjusted earnings of 7
cents per share compared with 3 cents per share in the year-ago
quarter. Total revenue increased 3% to $1.33 billion. However,
both fell short of the respective Zacks Consensus Estimates.
We appreciate MeadWestvaco's intent of becoming more of a
packaging company going forward. Following the sale of its
Envelope business and the Consumer & Office Products segment,
MeadWestvaco's generates 85% of its revenues from packaging.
Packaging is a large and growing global market, particularly
benefiting from the economic prosperity in the emerging markets
including Brazil, China and India. MeadWestvaco is well
positioned to capture growth from new products and solutions.
Management has reaffirmed its targets of $1 billion in sales
growth and 7-10% annual earnings growth over the next 3-5 years.
MeadWestvaco has stepped up its capital improvement plans and
updating its facilities more aggressively. Over the past two
years, the company has been making significant investments in two
of its core Packaging businesses - Food & Beverage (Covington
boiler project) and Industrial (Rigesa containerboard expansion),
which has led to capital expenditures of $655 million in 2011 and
$700 million in 2012. The investment in Brazil is expected to
boost revenues by 50% and more than double the operating earnings
of the Industrial segment. Cost savings and volume expansion from
these initiatives will significantly aid margin expansion in both
the segments in the next two years.
On the flipside, MeadWestvaco expects modestly lower earnings in
the first quarter compared to the prior-year quarter due to a
difficult comparison in the Industrial segment, including higher
start-up expenses related to the Brazilian expansion as well as
lower earnings from land sales in the Community Development and
Land Management segment. Furthermore, we remain cautious due to
weak demand in Europe.
Other Stocks to Consider
In contrast to MeadWestvaco, better stocks to consider in the
same industry are
Packaging Corp. of America
), which holds a Zacks Rank #1 (Strong Buy) while
Berry Plastics Group, Inc.
Graphic Packaging Holding
) both hold a Zacks Rank #2 (Buy).