BofA Upgrades WestRock After Containerboard Conference, London Pulp Week

While the RISI International Containerboard Conference indicated an improvement in North American demand, industry participants were “very constructive” on WestRock Co’s WRK integrated model, according to Bank of America.

The Analyst

BofA’s George Staphos upgraded WestRock from Neutral to Buy, while raising the price target from $42 to $48.

The Thesis

Two industry events held last week, namely the London Pulp Week and the RISI International Containerboard Conference, highlighted that macro and sector trends were stable to improving, Staphos said in the upgrade note.

While containerboard demand trends in North America seem to be improving, the risks faced by this section and by WestRock are not new to investors, the analyst said.

He added that European board and pulp trends remain challenging, while China trends are marginally better.

Although comparisons in 2019 have been more difficult than they were in 2016 and 2017, the corrugated market has performed well this year. Staphos further noted the strength in WestRock’s integrated model, which combined corrugated and consumer packaging and machinery installations.

“Taking cost out of customers’ packaging lines is viewed to be an increasingly important factor driving corrugated and WRK’s business model, which marries an in-house machinery/systems capability,” the analyst wrote.

Price Action

Shares of WestRock were flat at the time of publishing on Monday.