The Paper Chase: Analyst Sees These 2 Paper Stocks With The Most Upside

The paper industry is far from the most exciting sector to invest in but that doesn't mean that investors can't find opportunities.

George Staphos of Bank of America commented in a research report on Friday that he continues to hold a positive view on the containerboard and boxboard companies after several companies reported their earnings.

According to Staphos, the sector will benefit from improving demand, especially if the economy continues to improve. In fact, the analyst's industry contacts continue to maintain an approximate 2 percent growth for the future.

Most Upside

Staphos highlighted two picks in the sector, which have the most upside: WestRock Co (NYSE: WRK) and KapStone Paper and Packaging Corp. (NYSE: KS).

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Specifically, WestRock is expected to continue benefiting from improving fundamentals in the containerboard market. Moreover, recently announced price hikes could help boost earnings within the Consumer Packaging business.

WestRock is also progressing on its synergy and performance improvement goals and should be on track to achieve $1 billion in savings by the end of fiscal 2018.

KapStone Paper is a pure play in containerboard, which accounts for approximately 75 percent of the company's total revenue. Moreover, the company's relative smaller market share gives it the ability to grow at a faster rate than the industry as a whole while it is also seen as a takeover candidate in an industry that continues to see consolidation.

Shares of WestRock remain Buy rated with a price target raised to $66 from a previous $65.

Shares of KapStone remain Buy rated with an unchanged $29 price target.

Price Targets

The analyst made the following price target changes:

• Boise Cascade Co (NYSE: BCC) (Neutral rated) raised to $30 from a previous $28.
• Domtar Corp (USA) (NYSE: UFS) (Buy rated) raised to $48 from a previous $47.
• Graphic Packaging Holding Company (NYSE: GPK) (Buy rated) raised to $16.30 from $16.10.
• International Paper Co (NYSE: IP) (Neutral rated) $62 from a previous $61.
• Packaging Corp Of America (NYSE: PKG) (Buy rated) $106 from a previous $103.