Packaging company stocks rise after upgrades

Packaging company stocks raise after analyst upgrades shares of 3 larger producers

• By Mike Obel, AP Manufacturing Writer
• On 3:10 pm EDT, Monday September 14, 2009

NEW YORK (AP) -- Packaging companies rose Monday after an analyst upgraded the stocks of three large producers, saying investors should add such shares to their portfolios patiently.

George L. Staphos of Bank of America Merrill Lynch said the sector as a whole was due for a rise.

"Given (packaging companies') sharp underperformance relative to paper (company stocks) in recent months we expect packaging as a sector to catch up in upcoming months," he wrote in a client note.

Also, the fall fruit and vegetable harvests appear to be trending positively in the U.S. and Europe, which should help food can demand for several packaging companies.

Within the entire sector he picked three stocks for upgrades, Sonoco Products Co. and Sealed Air Corp., which he raised to "Buy" from "Neutral," and Avery Dennison Corp. which he lifted two notches to "Buy" from "Underperform."

Pasadena, Calif.-based Avery Dennison, which makes labels and pressure-sensitive materials, will outperform in an improving economy, Staphos said. Its restructuring moves should produce yearly savings of about $160 million, and its debt reduction efforts -- aiming to cut $350 million by the end of next year -- will ease financing costs.

He raised his price target $38 from $23.

Elmwood Park, N.J.-based Sealed Air, noted for its Bubble Wrap, is doing a good job of managing its resin costs, and the company's restructuring should boost this year's earnings by about $35 million. Any improvement in the global economy should lift Sealed Air's protective packaging business.

He raised his price target to $25 from $23.

Hartsville, S.C.-based Sonoco Products has a "much improved cost structure," and its share price reflects low demand, something that has begun turning around, Staphos said.

He raised his price target to $30 from $29.

In afternoon trading, Avery rose $2.12, or 6.5 percent, to $34.73, Sealed Air added $1.08, or 5.7 percent, to $20.13 and Sonoco gained $1.21, or 4.5 percent, to $28.03.

Buzz up!