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BofA/Merrill Lynch Upgrades International Paper (IP) and RockTenn (RKT) to Buy on MLP Prospects

October 7, 2014 7:06 AM EDT
Get Alerts IP Hot Sheet
Price: $34.94 -3.88%

Rating Summary:
    9 Buy, 9 Hold, 6 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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BofA/Merrill Lynch analyst George Staphos upgraded both International Paper (NYSE: IP) and RockTenn (NYSE: RKT)
from Neutral to Buy with a price targets of $55 (from $33) and $56 (from $54), respectively. The firm also reiterated a Buy rating on Packaging Corporation of America (NYSE: PKG) and raised his price target to $82 (from $79.).

Staphos said following the interest created by Perry Capital in July arguing for MLP structures, he is increasingly of the view that the companies will attempt to convert a portion of their businesses to MLPs. Doing so would revalue the stocks.

The analyst said using a conservative model framework, they estimate 20-30% upside potential in the shares through a conversion. They expect the most upside could come from RKT (~28%) followed by PKG (~25%) and IP (~22%).

PKG remains the firm's top pick in containerboard as its offers the best fundamental outlook of the three containerboard stocks they cover.

For an analyst ratings summary and ratings history on International Paper click here. For more ratings news on International Paper click here.

Shares of International Paper closed at $47.37 yesterday.



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