Domtar shares rise after upgrade to "Outperform"

Analyst upgrades Domtar shares, citing higher selling prices, lower operating costs

• On 11:11 am EDT, Thursday October 1, 2009

NEW YORK (AP) -- North American pulp and paper producer Domtar Corp. rose Thursday after an analyst upgraded the shares on higher pulp selling prices, especially in China, and lower manufacturing costs.

BMO Capital Markets analyst Stephen Atkinson upgraded the stock of the Montreal-based company to "Outperform" from "Underperform" and increased his price target to $43 from $33.

He said pulp prices rose in the third quarter by about $90 per metric ton from the second-quarter level.

Atkinson also said that based on his earnings forecasts for higher profits, the stock is relatively inexpensive.

Meantime, Sterne Agee analyst Mark Connelly, who has a $50 price target, raised his estimates on earnings per share for this year and next year, citing benefits from reduced debt.

"Domtar should easily achieve 30 percent debt to total capital (ratio) before 2010 is over," Connelly said.

In morning trading, shares rose $1.03, or 2.9 percent, to $36.25.