Macquarie Crumbles Paper Products, Downgrades International Paper and Rock-Tenn Company

In a report released Monday, Macquarie analyst Al Kabili downgrades International Paper Company IP and Rock-Tenn Company RKT both from Outperform to Neutral with a $54 (from $58) price target for International Paper and a $106 (from $125) price target for Rock-Tenn Company. Analyst at Macquarie are cautious on long term containerboard market due to long term demand remaining flat in the near term and little to none change in OCC prices, but do not believe growth potential in containerboard is gone completely. The Macquarie note noted last weeks Pulp & Paper Week (PPW) officially published a $10 per ton price cut to medium prices, which analyst at Macquarie state has a minimal effect in the open market and has little influence on its downgrades. Kabili adds to the report, downward sloped demand and a little supply in containerboard has loosened total supply and demand elasticity. Due to recent tail winds Macquarie cuts International Paper 2014 EPS from $3.56 to $3.61 and reduces Rock-Tenn Company's 2014 EPS from $6.69 to $6.86.