At the same time, further benefits are expected from the recent positive industry fundamentals in the North American containerboard market. These signs include consolidation, increasingly rational behavior of industry participants, high capacity utilization rates, and limited supply, which should bode well for the company’s recently-announced $50/ton containerboard price increase.
Lastly, additional upside to EPS could come from out-performance of the recently-outlined Smurfit integration synergy targets as management continues to find ways to increase productivity of the company’s mill and box-plant assets.
A story on integration
Sealed Air Corp (NYSE:SEE)’s total-solutions model combined with an industry leading innovation pipeline, high level of R&D spend focused on commercial success, recent management transition, and defensive portfolio make the company Barclay’s top pick in the packaging space in 2013.
Following a difficult 2012, and a full year of Diversey ownership (before acquisition, Diversey was a leading provider of cleaning, sanitation and hygiene solutions), the sentiment has recently shifted positively and should improve further into 2013 allowing for a high level of EPS growth to be combined with multiple expansion efforts.
Sealed Air Corp (NYSE:SEE)’s focus on integration/optimization continues to develop according to plan, with an estimated ~$200 million in total savings by 2014. Additionally, the company remains on track to divest ~$500 million in assets by mid-2013 which could aid the leverage profile.
Lastly, the industry and acquisition integration experience of new CEO Jerome Peribere should help to refocus the business, particularly at Diversey, and restore credibility with investors.
Other positive near-term catalysts include an upcoming analyst day this summer and the likely emergence of WR Grace from bankruptcy in late 2013. (For those who don’t know, Sealed Air Corp (NYSE:SEE) merged with WR Grace in 1998. WR Grace, after an unexpected rise in asbestos claims in 2000, filed for bankruptcy).
Combined, Sealed Air Corp (NYSE:SEE)’s shares could once again achieve a premium P/E multiple relative to peers this year. Both Rock-Tenn Company (NYSE:RKT) and Crown Holdings, Inc. (NYSE:CCK) are currently trading at a forward multiple of 12x.
Final word
Crown Holdings, Inc. (NYSE:CCK) is recommended as a buy on the basis of aggressive growth plans in the emerging markets. Rock-Tenn Company (NYSE:RKT) has solid valuations and a strong containerboard market in North America to form an appeal among investors. Sealed Air Corp (NYSE:SEE) is recommended as a buy on the basis of improving market sentiment and solid restructuring going on in the company.
The article Barclays Is Optimistic About Paper and Packaging originally appeared on Fool.com.
Zain is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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