Truist names Packaging Corporation stock and Sonoco stock best ideas

Investing.com - Truist named Packaging Corporation of America (NYSE: PKG) and Sonoco Products (NYSE: SON) as best ideas, maintaining Buy ratings on both companies due to pricing power, integration synergies, and productivity expected to offset rising costs.

Packaging Corporation of America remains the best-in-class producer with a consistent track record and attractive return profile, according to Truist. The company's acquisition of the GEF containerboard business last year added capacity to its highly utilized system and provides growth optionality over the next several years with likely upside to its original $60 million synergy target. The company recently increased its dividend by 20%.

Demand trends remain favorable with Packaging Corporation targeting low-single-digit percentage year-over-year volume growth in the second quarter, while approximately 10% of U.S. containerboard industry supply was closed last year. Prices have increased a net $50 per ton in 2026, offsetting rising input costs, while producers announced another $50 per ton increase for June. Each $50 per ton price increase in North America equates to approximately $290 million in incremental annualized EBITDA and approximately $2.45 in earnings per share for Packaging Corporation.

Sonoco Products was named a best idea given pricing power and self-help through margin improvement initiatives. In the second quarter, the company guided to year-over-year earnings growth despite an $8 million to $10 million net inflation impact, mainly driven by greater energy, freight, and other petrochemicals. URB prices increased $60 per ton in April, with each $10 per ton of pricing equating to $6 million in incremental annual EBITDA, for a total of $36 million. The company recently announced another price increase of $60 per ton effective July 8.

The company continues to make progress on its $150 million to $200 million margin improvement initiative targeted for 2028, which includes the remaining approximately $60 million of Eviosys synergies, commercial excellence, and operational improvement. Sonoco trades at 7.1 times 2027 Street EBITDA versus a historical 7.5 to 8.0 times.

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