Stock market today: Nasdaq closes above 23,000 for first time as tech rebounds
Investing.com -- UBS has initiated coverage of Smurfit WestRock (LON:SWR) with a “buy” rating and a $60 per share price target, pointing to significant organic growth potential from the turnaround of WestRock’s underperforming U.S. assets.
The note dated Monday, emphasized the company’s scale and scope but said that much of the expected $400 million in additional gains is not yet reflected in the share price.
Smurfit WestRock, formed in July 2024 through the merger of Smurfit Kappa and WestRock, is the world’s largest paper-based packaging producer, operating 62 mills and more than 500 converting facilities worldwide.
About 60% of its business is in North America, where analysts see the clearest opportunities for operational improvements.
UBS said Smurfit “trades on ~6.4x 2026E EV/EBITDA vs peers IP & PKG at ~8-10x despite potentially higher FCF yields.”
The initiation flags management’s European track record, with a return on invested capital averaging 14.7% between 2013 and 2023, compared with a sector average of 13.4%.
UBS said it expects 2026 U.S. containerboard prices to lift around 4% on tighter supply, driving 10% year-over-year EBITDA growth and roughly 230% free cash flow growth.
“After the initial $400m of synergies that is largely realised already, SW expects another $400m of identified gains, which we model in in 2026-27,” the brokerage said.
“If the former Westrock US box network were to achieve margins comparable to those of Stora Enso’s underperforming EU box business, this would add another $400m to EBITDA or $5.7/sh to our fair value for SW.”
UBS identified structural weaknesses in Smurfit WestRock’s U.S. footprint, particularly on the West Coast, where competitors Packaging Corp of America and International Paper have stronger coverage. Under-investment has contributed to a North American EBITDA margin gap.
To address this, Smurfit WestRock launched a capital deployment program in 2024 and shifted toward decentralization, giving individual plants accountability for their own profit and loss.
The brokerage said the company has already closed or restructured some facilities and returned about 40% of its loss-making U.S. box plants to profitability, with management targeting further improvements.
“We expect a leaner, more profitable, higher returns SW by 2030,” UBS said, citing contract repricing and plant-level optimization as central to the turnaround.
UBS forecasts revenue of $30.8 billion in 2025, rising to $31.6 billion in 2026, with EBIT margins improving from 6.3% in 2025 to 9.5% in 2026.
Net earnings are projected to nearly double from $922 million in 2025 to $1.7 billion in 2026. Dividend yield is expected to rise above 4% over the same period.
The brokerage added that Smurfit WestRock’s re-rating potential depends on execution of organic initiatives.
“We see these measures and improving FCF driving a re-rating in the EV/EBITDA multiple, helping SW to close the gap to its US peers IP and PKG, which trade on 7.8 & 10.2x 2026E EV/EBITDA respectively,” UBS said.