Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Packaging Demand To Buoy Paper & Related Products Industry

By Zacks Investment ResearchStock MarketsJan 09, 2020 08:35PM ET
Packaging Demand To Buoy Paper & Related Products Industry
By Zacks Investment Research   |  Jan 09, 2020 08:35PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

The Zacks Paper and Related Products industry is poised to grow on the booming e-commerce and growing demand for sustainable packaging options amid a shrinking graphic-paper market. Investments in breakthrough technologies are likely to bolster demand for high-quality paper products.

Increased Digitization a Woe

The transition to digital media has been eroding the graphic paper segment by reducing demand for printing, coated and uncoated papers. Paperless communication, increased use of email, lesser print advertising, more electronic billing and fewer catalogs have dented graphic paper demand. Hence, the industry is converting graphic paper mills into packaging paper and specialty paper mills.

Packaging Demand to Aid the Industry

The industry is primarily dependent on paper-based packaging, which is utilized in consumer staples, for stability, steady growth and earnings. Almost 60% of all paperboard packaging is used for food product segments, as beverages and dairy products, candy and confections, dry foods including cereals, and frozen foods like meats and vegetables. The balance services pharmaceuticals, cosmetics and personal care products.

The Paper and Related Products industry is poised to grow on the back of packaging demand in the days ahead, spurred by rising demand for innovative packaging, as well as shifting preference over plastic, owing to environmental concerns. Nowadays, packaging is not only containing and protecting the product, but also includes sustainable packaging solutions to cater to the increasing consumer awareness on environmental issues.

Growing demand of lightweight-packaging materials, environment-friendly boxes and implementation of new innovative technology is likely to fortify the paper and paperboard packaging market. The global paper & paperboard packaging market, which was worth $199 billion in 2018, is expected to reach $264 billion by 2026, at a CAGR of 3.6%. Moreover, increasing demand for hygiene products will fuel growth.

The booming e-commerce market continues to aid the Paper and Related Products industry, by creating positive growth rates for demand of corrugated boxes. Online shopping has become one of the most popular online activities worldwide. Packaging has gained utmost importance as it has to maintain the integrity and durability of a product, such that it can withstand the complex product-delivery process. Per Statista, global retail e-commerce sales are set to grow to $6.54 trillion in 2022 from the $3.53 trillion recorded in 2019. Moreover, improving disposable income, especially in developing countries, is one of the primary catalysts.

Other Growth Drivers

Apart from high raw-material costs, the industry, of late, has been affected by flaring up transportation costs, chemical costs and fuel costs. The companies have to transfer higher costs to customers, but it may not be always feasible, given the heightening competition. Consequently, these companies are now focusing on reducing costs, improving productivity and in turn, boosting profitability.

The paper industry has already begun incorporating recycled content into production methods. By maximizing recycling, the industry will be able to implement environmentally- and economically-sustainable production methods. Further, investment in breakthrough technologies will spur demand for high-quality paper products. Per Statista, the global market value of paper and paperboard is expected to reach $523.6 billion in 2022.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates gloomy prospects for the near term. The Paper and Related Products industry, which is a 16-stock group within the broader Zacks Basic Materials sector, currently carries a Zacks Industry Rank #243, which places it at the bottom 4% of 254 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The Paper and Related Products industry has underperformed the S&P 500 over the past year. The stocks in this industry have collectively dipped 10.5%, while the Zacks S&P 500 composite has rallied 24.5%. Meanwhile, the Zacks Basic Materials sector rose 1.1%.

However, the valuation looks inexpensive now. On the basis of the trailing 12-month EV/EBITDA ratio, which is a commonly used multiple for valuing Paper and Related Products companies, we see that the industry is currently trading at 11.33x compared with the S&P 500’s 11.99x and the Basic Material sector’s trailing 12-month EV/EBITDA of 9.7x.

Investors keen on the Paper and Related Products industry may consider P. H. Glatfelter Company (NYSE:GLT) , Mercer International Inc. (NASDAQ:MERC) , Neenah, Inc. (NYSE:NP) and Veritiv Corporation (NYSE:VRTV) . These stocks carry a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. All these stocks have positive earnings growth estimates for the current year.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Neenah Paper, Inc. (NP): Free Stock Analysis Report

Glatfelter (GLT): Free Stock Analysis Report

Mercer International Inc. (MERC): Free Stock Analysis Report

Veritiv Corporation (VRTV): Free Stock Analysis Report

Original post

Zacks Investment Research
Packaging Demand To Buoy Paper & Related Products Industry

Related Articles

Tim Knight
Approaching $900 Billion By Tim Knight - Oct 22, 2021 6

Tesla (NASDAQ:TSLA) has defied all the critics and is at a new lifetime high today. The P/E is nearly 500, by the way. Here’s the lifetime history of this money-maker:

Packaging Demand To Buoy Paper & Related Products Industry

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email