On Nov 21, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Despite reporting record earnings per share of $2.66 in the
fourth quarter on Nov 4, earnings estimates of Rock-Tenn Company
underwent sharp downward revisions due to a tempered volume
outlook and concerns regarding the negative impact of cost
headwinds and maintenance outage on 2014 results. concerns
regarding the negative impact of cost headwinds and on 2014
The 91% year-over-year growth in earnings in the fourth quarter
was driven by strong operating performance, higher pricing and
continued productivity improvements, partially offset by higher
To add to its woes, shares of the Norcross, GA-based leading
manufacturer of corrugated and consumer packaging and recycling
solutions in North America, which had otherwise been enjoying a
run above the $100 mark, has dropped to an average of $95 since
the earnings release.
OCC (Old Corrugated Containers) prices are reported to be flat to
down $5/ton in November. With a direct exposure to OCC prices,
Rock-Tenn will be able to realize another price hike only if
there is a sizeable increase in OCC prices.
Rock-Tenn will reduce its current mill production to meet
current customer demand at several of its other facilities, and
is expected to increase production back to normal levels banking
on improving customer demand. The company has scheduled major
maintenance outages at its Florence and Fernandina Beach mills in
the December quarter. This will impact results in the next
KAPSTONE PAPER (KS): Free Stock Analysis
ROCK-TENN CO (RKT): Free Stock Analysis
ORCHIDS PAPER (TIS): Free Stock Analysis
DOMTAR CORP (UFS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Following the fourth quarter earnings announcement, the Zacks
Consensus Estimate for 2014 for Rock-Tenn has gone down 9% to
$8.55 per share. Likewise, the Zacks Consensus Estimate for 2015
fell 7% to $9.66.
Other Stocks to Consider
Other stocks with favorable Zacks Rank in the paper and packaging
KapStone Paper and Packaging Corp.
), with a Zacks Rank #1 (Strong Buy), and
Orchids Paper Products Co.
), both carrying a Zacks Rank #2 (Buy).