Morgan Joseph Reiterates a 'Buy' on KapStone Paper and Packaging (KPPC); Raises 2009 Estimates & Price Target

May 22, 2009 9:03 AM EDT

Morgan Joseph reiterates a 'Buy' on KapStone Paper and Packaging Corp. (Nasdaq: KPPC). Price target increased from $4 to $6.

Morgan analyst says, "By assigning cash value to the company's alternative fuel tax benefit, we are increasing our price target for KPPC to $6. We are also adjusting our 2009 EPS estimate to $2.67 from $0.64...We now believe the company could add up to $2.03 above our previous EPS estimates for 2009 due to the federal alternative fuel tax benefit. We expect the benefit to generate payments that contribute up to $87mm in adjusted EBITDA for the remainder of the year. If the alternative fuel benefits are renewed in the F2010 federal budget, we believe the benefits could extend another year, but to be conservative, we forecast the credits ending in 3Q09...For 2010, we continue to estimate sales of $601.5mm, gross profit of $129.5mm, EBITDA of $96.2mm, operating income of $38.2mm, and net income of $12.7mm or $0.45 per diluted share."

KapStone Paper and Packaging Corporation produces and sells unbleached kraft paper and lightweight linerboard, and dunnage bags in the United States.

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