Seaport Global Securities Upgrades Smurfit Westrock (SW) to Buy

Seaport Global Securities analyst Mark Weintraub upgraded Smurfit Westrock (NYSE: SW) from Neutral to Buy, PT $52.00.

The analyst comments "We had been Neutral on SW partly because of its heavier weighting to Europe where substantial containerboard capacity is scheduled to enter the market this year and next. And we remain tilted cautious on European containerboard fundamentals in the year ahead, which is probably the main reason our look-forward earnings estimates (for 2026 in particular) are lower than consensus. But weakness in the stock (it's returned negative 20% ytd) suggests investors already share our concerns, and have seemingly more than adequately built it into valuation multiples, in our view, with SW trading at just 6.3x on our 2026 EBITDA estimates (and ~6.2x on consensus, ex our number). Moreover, sentiment on the European RCCM pricing should, we think, begin to shift more favorably for out years as RCCM pricing has already been declining (in August and September) and capacity closure announcements in Europe are likely to gather steam, due to strategic actions as well as in response to current poor profitability. ○ We also see the possibility of an upward re-rating to the multiple tied to the company's pending intent to lay out more details regarding its 5-year strategy plan (in February of next year). Frankly, one factor that has given us pause on SW has been our struggle to get our arms around what is going on financially (and potential trajectories) given somewhat limited disclosure by business line. A well laid out plan/framework could engender increased confidence on our part, and, we think, for that of investors too. What will be in the plan? As we understand it, there will be a roadmap through 2030. Presumably, the company will build on the already communicated $400MM in initial synergies, to be realized over the course of this year and next, including details on possible repositioning of assets and cost take-out (SBS being one business in focus). We also expect more discussion on what the company sees as substantial opportunity tied to commercial actions in its North American box business as well as more clarity on levels of capex needed to achieve its goals. Our sense is that capital required may be less than some fear and would point out that while SW's annual DD&A runs at a pretty lofty $2.4-2.5B, that includes sizable amortization, and that if we would estimate "standard" capital needs at closer to $1.6B assuming ~5% of sales, which, in turn, would suggest the current annual spend of $2.2-2.4B, at ~7% of sales, already includes meaningful "improvement" investment."

For an analyst ratings summary and ratings history on Smurfit Westrock click here. For more ratings news on Smurfit Westrock click here.

Shares of Smurfit Westrock closed at $41.98 yesterday.

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