Shares of Rock-Tenn Company (RKT) reached a new 52-week high of $105.97 on June 14, higher than its previous high of $104.09.
Rock-Tenn has delivered a robust one-year return of about 97% and a healthy year-to-date return of about 52%, outperforming the S&P 500. Average volume of shares traded over the last three months was roughly 728K.
The Norcross, Ga.-based paperboard and packaging company has delivered three positive earnings surprises over the past four quarters with an average surprise of 2.47%. Rock-Tenn has a market cap of $7.5 billion and a long-term expected earnings growth of 15.6%.
Growth Drivers
Shares of Rock-Tenn are ascending following its second-quarter fiscal 2013 results reported on Apr 23. The company reported earnings per share of $1.12, up 15% year over year, driven by strong operating performance. It was well ahead of the Zacks Consensus Estimate of $1.02.
Total revenue improved 2% year over year to $2.325 billion, yet missed the Zacks Consensus Estimate of $2.355 billion. The modest growth in top line was driven by increased sales in the Corrugated Packaging segment, somewhat offset by lower sales in the Consumer Packaging and Recycling segments.
For fiscal 2013, the company raised its cash flow guidance to a new range of $10 to $10.50 per share from its previous range of $9.50 to $9.75 per share, indicating increased demand for folding carton and paper.
On Apr 26, Rock-Tenn hiked its quarterly dividend by 33% from 22.5 cents per share to 30 cents per share. The mid-year increase in dividend is backed by growing free cash flow generation and long-term profitability of its business.
Moreover, Rock-Tenn’s investment in box plants, installation of new standard corrugated box operating system and increase in domestic and export pricing will help to improve its profitability.
In addition, Standard & Poor's has maintained a positive outlook on Rock-Tenn indicating that its corporate credit rating may improve from BBB- to BBB over the near term. Moody's has maintained its Ba1 rating with a stable outlook.
RockTenn currently retains a short-term Zacks Rank #3 (Hold).
Other Stocks to Consider
Other stocks with favorable Zacks Rank in the same industry are KapStone Paper and Packaging Corporation (KS), Resolute Forest Products Inc. (RFP) and PH Glatfelter Co. (GLT). While KapStone Paper and Resolute Forest carry a Zacks Rank #1 (Strong Buy), PH Glatfelter holds a Zacks Rank #2 (Buy).
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