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AptarGroup (NYSE:ATR), Crown Holdings (NYSE:CCK), Sealed Air (NYSE:SEE) and WestRock (NYSE:WRK) are the top stock picks in the packaging industry as it emerges from recession, analysts at Bank of America said Monday.
“We are near the end of volume declines and expect volumes to turn positive between 4Q23 and 2Q24 depending on the company after a packaging recession that began in mid-2022,” George Staphos, analyst at BofA, said in an October 16 report. “Growth will still be weak – like the early 2000s and 2010s based on our read of this cycle.”
As more Americans start taking a new class of anti-obesity drugs called GLP-1 agonists -- with brand names such as Ozempic and Wegovy -- demand for food packaging may weaken, but it’s also too early to tell.
“The impact of anti-obesity drugs (GLP-1) is being overplayed in the market, but, truth be told, we don’t know and they certainly aren’t helping consumption, either,” according to BofA, which said of individual stocks:
- “Crown Holdings (CCK) trades at an 11 times multiple on 2024 earnings, should see better-than[1]average volume growth and is leveraged to beverage can end markets, including private label, which should remain relatively strong.”
- “Sealed Air (SEE) trades at a 55% relative multiple when it has traditionally traded at 100%. Yes, its businesses are facing sharp cyclical headwinds, but management’s sense of urgency on optimizing performance and the portfolio appears high.”
- “WestRock (WRK) has $1 billion of self-help opportunities and is being acquired by Smurfit Kappa, even as the containerboard market looks to be stabilizing.”
- “AptarGroup is relatively inexpensive versus other pharma packaging companies like Buy-rated West Pharma (NYSE:WST) and Stevanato (NYSE:STVN), even as volume trends are strong in pharma and the company seems more intent than ever on improving returns. A recent field trip visit points to continued, long-term positives.”
BofA's analysts said they prefer packaging stocks over forestry products stocks. They downgraded Boise Cascade (NYSE:BCC) to Underperform from a prior investment rating of Neutral.