Macquarie On Clearwater Paper: 'The Best Is Yet To Come'

Macquarie's Anthony Young has increased his price target for Clearwater Paper Corp. CLW to $75 from $66 and maintained his Outperform rating. Young was impressed with the company's prospects after a recent meeting between CEO John Hertz and investors hosted by Macquarie.

Management has noted the digester project is on track to complete in late 2017. The total investment is $150 million and should increase EBITDA by $35 million in 2018. Future growth will be driven by the company's tissue focus.

"We expect that the company will announce an investment in a new tissue machine," Young noted. The new machine would continue driving growth beyond 2018.

The company will continue to perform stock buybacks. The buybacks are set to pick up in the 2H16 after it purchased about 5 percent of outstanding shares in Q1 2016. Management stated it would "be willing to tap their revolver to finance share buybacks in order to achieve their goal of returning 50% of operating cash flow minus maintenance capital expenditures," Young stated.

Young's estimates remain the same, but the price target change is based on his modification of his valuation of the company to sum of the parts analysis.