Markets

Analyst Actions: Credit Suisse Initiates Coverage of Packaging Corp. of America With Neutral, TP of $27

High Quality, High Valuation - INITIATING Coverage with a NEUTRAL Rating and Target Price of $27.

Initiating Coverage at Neutral with a $27 Target: "PKG routinely ranks among the top performers within the containerboard industry. The combination of the company's low-cost virgin fiber-based mills and strong management execution have enabled PKG to routinely generate above average profitability, returns, and volume growth. We believe valuation is full, which drives our Neutral rating."

Energy Project Savings Should Drive Solid Earnings Growth in 2012: "Even as we expect general cost inflation and a lack of industry pricing to be a headwind for the containerboard industry next year, we believe PKG can grow earnings ~11% on the back of cost savings from recently completed energy projects that provide a ~$0.20/share tailwind next year."

Virgin Asset Base a Long-Term Competitive Advantage: "Given demand from China, we believe OCC prices will see a long-term upward trend, which should only widen PKG's cost advantage over time."

A Lot is Already in the Share Price; However: "PKG trades at a 26% premium to its comparables on an EV/EBITDA basis, and we see a $0.16 per share EPS shortfall relative to the 2012 consensus owing to cost inflation and lack of pricing ability. We would wait for a better entry point."

Valuation: "Our $27 target price is the equal weighted average of two valuation methodologies: (1) an assumed cyclical peak EV/EBITDA multiple of 6 on our 2013 estimates, and (2) our DCF."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 MTNewswires.com. All rights reserved. Unauthorized reproduction is strictly prohibited.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Commodities

Latest Markets Videos

    MTNewswires

    Founded in 1999, MT Newswires (formerly known as Midnight Trader) is a leading provider of original source, multi-asset class, real-time, global financial news and information to most of the largest banks, brokerage firms and professional market data, trading & research applications in North America.

    Learn More