Barclays Starts Coverage on U.S. Paper & Packaging: Sometimes Being Stable Isn't Enough

Barclays Starts Coverage on U.S. Paper & Packaging: Sometimes stable is not enough

Analyst, Scott L. Gaffner's theme: Limited near-term growth and fair valuations keep us on the sidelines

Gaffner, said, "Stock selection is key: No clear sub-sector theme leaves us focused on a bottom-up analysis. We prefer stocks with more stable earnings and/or the potential to move higher in a cyclical recovery. Sealed Air (NYSE: SEE), our top pick with a Overweight rating, benefits from both. We also assign Overweight ratings to Ball (NYSE: BLL), Owens-Illinois (NYSE: OI) and International Paper (NYSE: IP). BLL stands out for its high-quality earnings, while OI and IP could still benefit from cyclical growth, being laggards in the cycle. We also initiate on Avery Dennison (NYSE: AVY), Bemis (NYSE: BMS), Crown Holdings (NYSE: CCK), Packaging Corp. of America (NYSE: PKG), Silgan (Nasdaq: SLGN), and Sonoco Products (NYSE: SON) with Equal Weight ratings."

"Sealed Air is our top pick: We see upside potential driven by a high level of innovation, expansion into emerging markets and synergy potential from the Diversey acquisition. Downside risk is limited by razor/razorblade model, defensive end markets, and low asset intensity. We expect above-average longer-term growth driven by mega-trends around food safety and security, product protection, and health trends focused on facility hygiene."

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