Zacks analyst blog spotlights Clearwater Paper, Mercer International, Veritiv and Sylvamo

For immediate release

Chicago, IL – May 10, 2022 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Stocks recently featured in the blog include: Clearwater Paper CLW, Mercer International, Inc. MERC, Veritiv VRTV and Sylvamo SLVM.

Here are the highlights from Monday’s analyst blog:

These 4 paper stocks are still going strong

Fears of a recession may be in the air. The Fed could take a more tolerant stance on inflation, if only to make sure it doesn’t trigger it. And inflation can drive up the costs of a host of things, including essentials like food. But guess what? There are still markets where demand remains extremely strong. And more importantly, remains in excess of supply. Which means there are high prices.

I know. You might be thinking, oh yeah. That’s what we were saying about the housing market a few months ago. And see how supply constraints and affordability considerations (which pushed a lot of people out of the market) ultimately created a situation some are calling a bubble there. Although I do not entirely agree with this view and consider that the housing market remains attractive, I am talking about another industry here. And it’s paper.

Paper producers are seeing an increase in raw material costs (especially pulp) which they are passing on by increasing prices. But they have no production/labour constraints.

And due to its use, primarily as a packaging material, in a wide range of industries, the demand for paper is largely driven by population growth and increased industrialization. So it’s easy to see why countries like China and India are seeing growing demand.

But these are not the only considerations. Western markets are more mature in terms of paper consumption, particularly in the food, hygiene and other personal use markets. And innovative production techniques are expanding the use cases for paper. Demand in these markets is therefore strong and relatively inelastic.

Additionally, the pandemic has been a boon to this industry, as it has not only increased household consumption of tissues and other hygiene products, but it has brought about a permanent change in the way we buy things. So, most of us today are becoming more comfortable with online shopping, which of course increases the demand for paper containers, boxes, etc. to facilitate the transportation of these items.

And while plastic containers continue to be used, people are much better informed these days about the related environmental concerns. Paper packaging appears to be a more benign option, although its production generates chemical waste. At least wood production can be managed in a way that minimizes environmental impact.

So while industry growth is tied to GDP growth, right now there are plenty of other drivers that are expected to continue fueling demand.

That being said, it should be borne in mind that digitization is leading to a reduction in the use of paper in schools and offices, a trend that is likely to continue and even expand. So, if you invest in paper, it is better to minimize exposure to this segment.

Here are some actions to consider-

Clearwater Paper

Clearwater Paper Corp. manufactures and supplies bleached paperboard and bathroom tissue for consumers and parents in the United States and around the world. Its Pulp and Board segment produces various packaging materials for packaging converters, folding box converters, merchants and commercial printers. Its Consumer Products segment offers facial tissues for in-home and out-of-home consumption through retailers and wholesale distributors, including grocery stores, clubs, mass merchants and discount stores.

Clearwater stocks carry a Zacks rank of No. 1 (Strong Buy). It beat December quarter estimates by 36.7%. And in the past 60 days, its 2022 earnings estimate has jumped 71 cents (30.5%). The only analyst providing estimates expects earnings to rise 195.2% this year. The shares are trading at 10.6X earnings, which is close to their low point last year and well below the S&P’s 20.0X. The industry average, however, is less than 7.2X.

Mercer International, Inc.

Mercer International owns and operates a diversified pulp and paper business in the southern German states of Saxony and Thuringia. Mercer’s two operating segments are pulp and wood products.

It operates its pulp business through subsidiaries and targets fabrics, specialty papers, printing and writing papers and other manufacturers. Its lumber products are sold through distributors, construction companies, secondary fabricators, retail yards and home centers. Mercer also produces and sells green energy produced from a biomass cogeneration plant to third-party utilities.

Mercer beat the December quarter estimate by a quieter 16.7%. And just like Clearwater, its estimates have increased significantly over the past 60 days. In fact, the Zacks Consensus is now at $2.75, an increase of $1.22 (79.7%) from 60 days ago.

The shares carry a Zacks No. 1 rank. The shares are trading at 5.9 times earnings, close to their low point last year, and below both the broader industry and the S&P500.

Veritiv

Veritiv Corp. offers value-added business-to-business packaging products in North America. Veritiv provides packaging, print and print management, publishing, supply chain installation and logistics solutions that span the entire lifecycle of core business operations. The company’s customers vary across a number of industries including manufacturing, healthcare, retail and more.

The only analyst providing estimates sees earnings growth of 63.2% this year and has raised its estimate for 2022 from $9.75 to $14.0 (43.6%) in the past 60 days. Last quarter, it exceeded estimates by 38.0%. The shares carry a Zacks No. 1 rank. The shares are trading at 9.4 times earnings, which is close to its low point last year and compares favorably to the S&P 500.

Sylvamo

Sylvamo Corp. is a paper company operating in Europe, Latin America and North America. It mainly targets education, communication and entertainment segments. In addition to various paper products (fine paper; pulp, aseptic and liquid packaging board and unbleached coated kraft papers), it sells hardwood pulp, including bleached hardwood kraft and bleached hardwood kraft. ‘eucalyptus; bleached softwood kraft pulp; and bleached chemo-thermomechanical pulp.

The shares carry a Zacks rank of No. 2 (buy). They beat the Zacks Consensus estimate by 28.6% last quarter and analysts have raised their estimate for 2022 by 65 cents (9.3%) in the past 60 days. At 5.0 times earnings, the shares are trading below their median value over the last 6 months (when they started trading).

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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.

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Clearwater Paper Corporation (CLW): Free Stock Analysis Report

Mercer International Inc. (MERC): Free Stock Analysis Report

Veritiv Corporation (VRTV): Free Inventory Analysis Report

Sylvamo Corporation (SLVM): Free Stock Analysis Report

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