Rock-Tenn Down to Strong Sell on Y/Y Decline in Q3 Earnings - Analyst Blog

On Aug 19, Zacks Investment Research downgraded Rock-Tenn Company ( RKT ), manufacturer of consumer packaging products, to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Rock-Tenn has witnessed sharp downward estimate revisions after reporting third-quarter fiscal 2014 (ended Jun 30, 2014) results on Jul 29. Adjusted earnings declined around 9% year over year to $1.97 per share.

Shipments at the Corrugated Packaging segment of 1,962,000 tons increased around 2.1% or 40,000 tons from the year-ago quarter. However, the Consumer Packaging segment's paperboard and pulp shipments decreased about 0.5% or 2,000 tons year over year to 394,000 tons.

Rock-Tenn guided fiscal fourth quarter adjusted earnings in the range of $1.00 to $1.10 per share. For the fiscal fourth quarter, Rock-Tenn expects the recovered fiber market to experience a moderate rise in pricing.

Rock-Tenn expects volumes increment, investment in box plants and the acquisition of Simpson Tacoma Kraft Paper Mill to aid sales growth. However, benefits from the improving sales environment will be offset by the estimated higher costs of recycled fiber, freight and commodities.

Following the third-quarter earnings announcement, the Zacks Consensus Estimate for fiscal 2014 has gone down 1% to $7.05 per share. Likewise, the Zacks Consensus Estimate for fiscal 2015 fell 6% to $8.16 per share.

Other Stocks to Consider

Better-ranked stocks in the paper and packaging industry include Mercer International Inc. ( MERC ), Neenah Paper, Inc. ( NP ) and Orchids Paper Products Company ( TIS ). All these stocks carrry a Zacks Rank #2 (Buy).

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

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

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