Zacks Industry Outlook Highlights International Paper, Suzano and Smurfit Westrock

For Immediate ReleaseChicago, IL – April 11, 2025 – Today, Zacks Equity Research discusses International Paper Co. IP, Suzano SUZ and Smurfit Westrock Plc SW.Industry: Paper ProductsLink: https://www.zacks.com/commentary/2442845/2-paper-and-related-products-stocks-to-keep-an-eye-on-despite-industry-challengesThe Zacks Paper and Related Products industry has been grappling with subdued demand due to lower consumer spending amid inflation and declining graphic paper demand due to the shift toward digitalization. However, increasing packaging requirements due to the rise in e-commerce activities and steady demand from consumer-oriented end markets, such as food and beverages, and healthcare, are expected to support the industry. Increasing environmental awareness is boosting the appeal of paper as a sustainable and eco-friendly packaging alternative, serving as a major growth driver.Companies like International Paper Co. and Suzano are likely to gain from the above-mentioned trends.Industry DescriptionThe Zacks Paper and Related Products industry comprises companies that manufacture and sell paper and paper products. The industry is highly diversified in terms of products, ranging from graphic paper and packaging paper to absorbent hygiene products. Graphic papers, which include printing and writing papers, and newsprint, are utilized for communication purposes.The industry provides packaging solutions for liquid, food, pharmaceutical, beauty, household, commercial and industrial products. It also produces fluff and specialty pulps utilized in absorbent hygiene products, tissues and paper products. The industry caters to a wide array of industries, including food and beverage, farming, home and personal care, health, retail, e-commerce, and transport. The industry players meet customers’ shipping, storage and display requirements with sustainable solutions.Major Trends Shaping the Future of the Paper and Related Products IndustryWeak Demand, High Costs & Tariffs Remain Concerns: The transition to digital media has undermined the demand for the graphic paper market for some time now. Paperless communication, increased use of email, less print advertising, electronic billing and fewer catalogs have dented graphic paper demand. This shift has prompted companies in the industry to convert their production lines to focus on packaging and specialty paper to stay relevant in a digitized economy.However, the packaging demand has also lately been impacted and the companies in the industry have been witnessing volume declines due to lower consumer spending on goods, reflecting the inflationary scenario. They had to cut down production levels to align with customer demand.The industry is witnessing rising costs for transportation, chemicals and fuel. Thus, industry players are increasingly focusing on pricing actions and cost reduction, and resorting to automation in manufacturing to boost productivity and efficiency. The impacts of tariffs and retaliatory tariffs add to the industry’s concerns.E-commerce & Consumer Products to Support Packaging Demand: Despite the current headwinds, the industry’s exposure to consumer-focused markets, such as food, beverages and healthcare, ensures stable earnings growth. With the rise of e-commerce, packaging has gained the utmost importance as it helps maintain the integrity of the products and withstand the complexities of delivery.According to Statista, global e-commerce revenues are expected to reach $4.3 trillion in 2025 and see a compound annual growth rate (CAGR) of 8% between 2025 and 2029. Turkey is expected to lead, followed by Brazil and India. By 2026, the U.S online retail market is forecast to surpass the $1.5 trillion mark. The China e-commerce market is expected to attain $2 trillion in 2027. This presents a major growth opportunity for the Paper and Related Products industry.Increased M&A Activities to Transform the Paper & Packaging Landscape: Increasing demand for sustainable packaging options and eco-friendly packaging solutions will support the paper market in the days ahead. Smurfit Westrock Plc was formed by merging two major paper and packaging industry players — Smurfit Kappa and WestRock — on July 5, 2024.With an unmatched geographic reach spanning 42 countries and the two companies’ highly complementary portfolios and innovative sustainability capabilities, Smurfit Westrock is likely to be the preferred packaging partner for companies and customers across the globe. International Paper completed the acquisition of DS Smith earlier this year, a strategic move to strengthen its corrugated packaging business in Europe and prioritize sustainable packaging.Zacks Industry Rank Indicates Dull ProspectsThe Zacks Paper and Related Products industry is a nine-stock group within the broader Basic Materials sector. The industry currently carries a Zacks Industry Rank #186, which places it in the bottom 25% of the 247 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bleak prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.Before we present a few Paper and Related Products stocks that investors can consider, it is worth looking at the industry’s stock-market performance and valuation picture.Industry Versus Broader MarketThe Paper and Related Products industry has outperformed the S&P 500 and the sector over the past year. The stocks in this industry have gained 14.2%, while the Basic Materials sector has declined 15.7%. The S&P 500 composite has grown 6.3% during this time frame.Industry's Current ValuationOn the basis of the forward 12-month EV/EBITDA ratio, a commonly-used multiple for valuing Paper and Related Products companies, we see that the industry is currently trading at 8.49X compared with the S&P 500’s 12.88X and the Basic Material sector’s forward 12-month EV/EBITDA of 7.01X.Over the last five years, the industry has traded as high as 16.26X and as low as 7.82X, with the median being 10.25X.2 Paper and Related Products Stocks to ConsiderSuzano: The company inaugurated the world's largest single-line pulp mill in Ribas do Rio Pardo, Mato Grosso do Sul state, in December 2024, which has the capacity to produce 2.55 million tons of pulp per year. This marked the largest investment in Suzano's 100-year history. It will boost SUZ’s installed pulp production capacity by 24% to 13.5 million tons per year.The additional capacity from the new pulp mill led to record pulp and paper sales of 12.3 million tons in 2024. The previous acquisition of two industrial assets from Pactiv Evergreen in Arkansas and North Carolina also contributed to the results. The assets offer strategic advantages, given the high availability and competitive prices for wood and energy in the region and access to railways, ports and highways.SUZ is now a major supplier of paper used to produce liquid packaging boards in North America. It is currently the largest supplier of hardwood market pulp in North America. Suzano also bought a 15% stake in Lenzing, which is a global supplier of premium cellulosic fibers for the textile and non-woven industry. This is in sync with its strategy to grow in new markets.The Zacks Consensus Estimate for 2025 earnings for the Salvador, Brazil-based integrated pulp and paper producer has moved up 26% in the past 90 days and indicates year-over-year growth of around 304%. The company has a long-term estimated earnings growth rate of 55.7% and currently carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.International Paper: The company’s recent acquisition of DS Smith establishes a new global leader in sustainable packaging solutions, focusing on the North America and EMEA markets. It had earlier expected $514 million of pre-tax cash synergies from the DS Smith acquisition by 2027. This has now been updated to $600-$700 million.This increase factors in gains from applying the 80/20 strategic approach in EMEA, mill and box plant optimization and an increased reduction in overhead costs. For 2027, the company projects net sales of $26-$28 billion. The midpoint of the guidance represents a compound annual growth rate (CAGR) of 13.2% from $18.6 billion reported in 2024.Adjusted EBITDA is envisioned at $5.5-$6 billion in 2027. The midpoint suggests a 42.5% CAGR over the 2024-2027 period. This growth is expected to be driven by above-market volume growth, lower costs stemming from footprint rationalization, operations optimization and overhead reduction, as well as synergies from the DS Smith acquisition.This Memphis, TN-based entity has a trailing four-quarter earnings surprise of 41.5%, on average. The Zacks Consensus Estimate for IP’s 2025 earnings remained unchanged over the past 90 days. The estimate indicates year-over-year growth of 2.7%. The company has a long-term estimated earnings growth rate of 52.6% and currently carries a Zacks Rank #3 (Hold).Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report International Paper Company (IP): Free Stock Analysis Report Suzano S.A. Sponsored ADR (SUZ): Free Stock Analysis Report Smurfit Westrock PLC (SW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks