NEW YORK (AP) -- Shares of paper and packaging companies got an early boost Friday before giving up their gains amid a largely down market. The early rise came on investor optimism that recent price increases will stick and boost their profits.
Jefferies analyst Philip Ng said that his trade sources are convinced that the full $50 per ton containerboard price will remain in place as a result of tight market conditions. He boosted his price targets for International Paper Co., Rock-Tenn Co. and Packaging Corp Of America, saying that the stocks are still undervalued given the amount of cash those companies are generating.
Ng said he expects investors to become more positive about investing in the companies once they start returning cash to shareholders in a more meaningful way through either higher dividends or stock buybacks.
Ng said his top picks in the sector include International Paper and Rock-Tenn. He rates both as "Buy." He said both stocks have the potential to rise about 30 percent — boosting his price target for International Paper by $8 to $60 and his target for Rock-Tenn by $12 to $117.
The analyst also increased his price target for Packaging Corp Of America by $10 to $49. He rates that company as a "Hold."
Ng added that all three companies could decide to increase their dividends or complement their current payouts with stock buybacks.
In midday trading, International Paper shares fell 50 cents to $47.73 after initially rising to $48.83, Rock-Tenn shares dropped 59 cents to $88.21after climbing to $90.23 and Packaging Corp edged down 29 cents to $44.63 after rising as high as $45.27.