Deutsche Bank Upgrades Int'l Paper (IP) and Packaging Co of America (PKG) to Buy

July 21, 2009 7:03 AM EDT

Deutsche Bank upgrades Int'l Paper (NYSE: IP) and Packaging Co of America (NYSE: PKG) from Hold to Buy. Price target $24 for both companies.

Deutsche analyst says, "Recent events in the containerboard industry are developing better than we had
anticipated. As a result, we are upgrading 2 of the largest containerboard producers, International Paper & Packaging Corporation of America, to a Buy. While significant risks remain, it is clearer & clearer that the containerboard industry has managed itself in a fundamentally different fashion over the past year."

"We are boosting our price target for PKG from $14 to $24 based upon a 14.3X multiple of normalized earnings (est. @ $1.75). IP is also boosted from $16 to $24. For IP, the target represents 12X our current normalized EPS estimate (est. @ $2.00). We are using a slightly lower multiple for IP to reflect its greater exposure to more volatile commodities like pulp as well as its significant exposure to the declining US uncoated free sheet market. The greatest risks facing both IP & PKG involve domestic and global macroeconomic risk, currency risk, re-inflation of input costs and political risk surrounding the black liquor credits."

Packaging Corporation of America produces containerboard and corrugated products in the United States.

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