UBS initiates Smurfit Westrock stock with Buy rating, sees undervalued turnaround

Investing.com - UBS initiated coverage on Smurfit Westrock (NYSE:SW) with a Buy rating and a $60.00 price target on Monday, citing an undervalued turnaround opportunity in the packaging company. According to InvestingPro data, the company, a prominent player in the Containers & Packaging industry, has maintained dividend payments for 14 consecutive years, demonstrating consistent shareholder returns despite market volatility.

The investment bank noted that Smurfit trades at approximately 6.4x 2026 estimated EV/EBITDA compared to peers International Paper and Packaging Corporation of America at roughly 8-10x, despite potentially higher free cash flow yields. Current InvestingPro analysis shows the stock trading at an EV/EBITDA of 8.47x, with analyst targets ranging from $46 to $63, suggesting significant upside potential. Get detailed valuation metrics and more insights with InvestingPro’s comprehensive research tools.

UBS believes Smurfit management has been conservative in communicating the long-term upside from the turnaround, with potential for gains beyond the initial $400 million in synergies, possibly exceeding $800 million by 2030 if its box business can achieve typical box plant margins.

The firm highlighted Smurfit management’s strong long-term track record of earnings growth in Europe with high return on invested capital, averaging 14.7% from 2013-2023 compared to the sector average of 13.4%, despite market volatility.

UBS projects 2026 U.S. containerboard prices will increase approximately 4% on a tightening supply outlook, supporting 10% year-over-year EBITDA growth and approximately 230% free cash flow growth, helping to narrow Smurfit Westrock’s EV/EBITDA discount versus peers.

In other recent news, Jefferies has upgraded Smurfit Westrock’s stock rating from Hold to Buy, increasing the price target to $55.00 from $44.00. This upgrade follows the merger that formed Smurfit Westrock, which took place about a year ago. Jefferies highlighted the company’s potential to achieve returns similar to those of its competitor, Packaging Corporation of America. The firm noted that the integration process has been "reasonably steady," despite initial concerns regarding WestRock’s uneven performance and higher cost structure. Jefferies pointed out that while WestRock possessed well-capitalized assets, it faced challenges due to poor management and a centralized strategy prioritizing volume over value. These developments are the latest updates for investors to consider regarding Smurfit Westrock.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.