Infosys, Wipro decline despite upbeat Q2 earnings; margin concerns weigh
Investing.com -- JPMorgan initiated coverage of Packaging Corp of America with an Overweight rating and a $242 price target, saying the company is best placed to benefit from a structural shift in the U.S. corrugated container market as peers cut capacity and prioritize margins over volumes.
The brokerage said rivals including International Paper and Smurfit WestRock are pursuing “value over volume” strategies that could lead to mill closures and reduced supply.
With industry operating rates already near 95%, JPMorgan expects the market to tighten even as demand remains below historical levels.
PKG, the third-largest U.S. box producer, is viewed by the firm as a leader on most operating metrics and well positioned to take share.
JPMorgan said the company’s balance sheet gives it flexibility following its $1.8 billion purchase of Greif, which it estimates will lift earnings per share by about 11%.
By 2026, the brokerage expects PKG’s leverage to fall to 1.3 times EBITDA from about 2 times, creating scope for share buybacks.
An annual repurchase program of $500 million, or about 2.5% of market value, could be supported by cash flow, it said.
JPMorgan also highlighted Smurfit WestRock as a preferred name, citing its high exposure to U.S. market dynamics, potential for $800 million to $1.2 billion of incremental EBITDA, and a lower valuation multiple than International Paper.