Shares of several packaging and containerboard companies rose Tuesday on price increases and the prospect of rising profit.
Analyst Mark Connelly of Sterne Agee said in a client note of price increases by International Paper Co. as of Jan. 1, "we expect most other producers to announce increases of their own."
"While we remain concerned about the structural health of the containerboard business, IP benefits far more from higher prices than from improved volumes, at this point," he said.
Deutsche Bank analyst Mark Wilde also said price increases by International Paper will likely usher in similar increases from other producers. He said the company is raising containerboard prices by $50 a ton on the East Coast and $70 a ton on the West Coast.
The increases coincide with the expiration at the end of the year of black liquor credits, an alternative fuel tax credit initially intended to promote the development of such fuels, he said. "Black liquor" is a pulp-making byproduct that can be mixed with diesel for fuel.
Since Nov 2008, containerboard prices have dropped $70-80 a ton, which Wilde said would reverse much of the decline.
Credit Suisse said profit will likely rise next year at Packaging Corp. of America and added the Lake Forest, Ill., company to its U.S. Focus List, a group of recommended stocks.
Packaging Corp. offers investors an "underappreciated pricing power and margin expansion story in 2010 which should lead to material increases" in consensus earnings estimates, analyst Chip Dillon said in a client note.
Shares of International Paper rose 50 cents, or about 2 percent, to $25.95. Packaging Corp. jumped $1.25, or 6 percent, to $21.17 and Temple Inland Inc. increased $1.16, or 6.5 percent, to $19.15.
However, Smurfit-Stone Container Corp. dropped nearly 50 percent as the maker of containerboard and corrugated packaging said Tuesday it has filed a reorganization plan as it seeks to emerge from Chapter 11 bankruptcy protection in early spring.
It filed its plan in U.S. Bankruptcy Court for the District of Delaware.
Smurfit-Stone Container, based in Creve Coeur, Mo., also said it has prepaid all of the $43 million remaining in a term loan and expects to prepay about $7 million remaining in a Canadian term loan by the end of December.
Shares fell 26 cents, or 51 percent, to 25 cents.