Seeking Alpha: Smart Deals And Smurfit Synergies Can Still Help Rock-Tenn

Rock-Tenn (RKT) is a fairly well-respected company in the paper packaging industry, but the company has struggled to generate appreciably better returns on capital over time. I suspect that is at least part of the reason that the company has lagged both International Paper (IP) and Packaging Corp (PKG) over the long term and other players like Graphic Packaging (GPK) and MeadWestvaco (MWV) more recently.

The company took on a big operational challenge (and a lot of debt) when it acquired Smurfit-Stone at a generous price in 2011, but the company has likely not maxxed out the potential synergies and operational improvements here. I do have some concerns about the near-term health of the corrugated and containerboard markets, but it looks as though the shares already factor in a fair bit of that risk.

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Smart Deals And Smurfit Synergies Can Still Help Rock-Tenn

Seeking Alpha: Plum Creek Timber Biding Time

The wait for Plum Creek Timber's (PCL) realization of value from its timber assets drags on. These shares bounced up for a little while after my Top Idea write-up in September 2013 ("Patient Investors Get A Crack At Plum Creek Timber"), but declined sharply on the announcement of the acquisition of MeadWestvaco's (MWV) timberland and the concomitant equity offering. Matters were helped little when the company followed that up in January of 2014 with a weak guide for 2014 EPS on lower land sales.

Plum Creek shares have long traded at premiums to Weyerhaeuser (WY) and Rayonier (RYN) (at least on an EBITDA basis), but investors seem to be tiring of the wait for a sustained recovery in housing construction and demand for sawlogs in the southern U.S. For what small consolation it offers, it doesn't appear that Plum Creek's issues are all company-centric, as Rayonier and Potlatch (PCH) have declined by similar amounts since September and Weyerhaeuser is also in the red for that period.

I remain bullish on the long-term value of these shares, but I realize that a "be patient, it gets better" call is not the most compelling call to make, particularly with the shares trading around 19x 2014 EBITDA. A clean 2014, with higher harvest volumes and better prices, would be welcome, but patient investors can still find a lot of value in the company's substantial timberland holdings, real estate development potential, and possible biomass energy play.

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Plum Creek Timber Biding Time

Investopedia: MeadWestvaco's Sum Of The Parts Doesn't Seem To Add Up To Value

MeadWestvaco (NYSE:MWV) has always been a little more willing than average to realign its business towards better long-term returns for shareholders. To that end, the company has been willing to divest/sell businesses (including its consumer and office products business (which merged with ACCO Brands (NYSE:ACCO)) while acquiring packaging and chemicals businesses in faster-growing areas like Brazil and India. That said, while MeadWestvaco does indeed look like a well-run packaging and specialty chemicals company, it's difficult to generate a cash flow scenario that suggests these shares are dramatically undervalued.

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Investopedia: Deleveraging And Diversification Make Graphic Packaging Worth Watching

By and large, it's hard to get excited about owning paper and paper packaging stocks for the long term. A few strong operational stories such as Rock-Tenn (NYSE:RKT) and Packaging Corp (NYSE:PKG) have outperformed, but by and large this is an industry with very modest revenue growth and highly variable input costs. All of that said, I think investors should take a closer look at Graphic Packaging (NYSE:GPK). Not only has the company made good progress with operating efficiencies, it is also a long-term deleveraging and diversification story.

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http://www.investopedia.com/stock-analysis/2013/Deleveraging-And-Diversification-Make-Graphic-Packaging-Worth-Watching-GPK-RKT-PKG-MWV0107.aspx

Investopedia: AptarGroup - When A Great Business Doesn't Mean A Great Stock

I wish I could like AptarGroup's (NYSE:ATR) stock as much as I like the business. After all, there's something to be said for a company that has leveraged its expertise in valves, pumps and closures to become a leading player in products like fine-mist spray pumps, lotion pumps, nasal spray pumps and a variety of innovative food and beverage packages. Unfortunately, it looks like the Street is already well acquainted with the good points of this company, and the stock sports a fairly demanding valuation.

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Seeking Alpha: Fourth Quarter Results Suggest The Street Still Underestimates 3M

Shares of the multi-armed conglomerate 3M (MMM) are up about 10% since I last discussed the company, but the story hasn't really changed all that much. Trouble in a few businesses masks an otherwise relatively solid story and Wall Street sell-analysts can barely muster tepid enthusiasm for the shares. Europe and assorted technology markets represent a risk to 2012 results, but fourth quarter results suggest that most of the risk here is to the upside.

3M Steps Over A Low Bar In Q4
To be fair, 3M's outperformance in the fourth quarter was against pretty weak expectations. Still, nearly 6% in constant currency revenue growth is nothing to sneeze at. Organic revenue growth of 3.3% (about one-third coming from volume) was not so spectacular, but did represent a sequential improvement - suggesting that 3M's performance may have bottomed in December.


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Fourth Quarter Results Suggest The Street Still Underestimates 3M

Investopedia: Packaging Corp Thinks Outside The Box

Time after time, investors who do a little extra work to identify those companies in commodity industries that do things a little better, see long-term rewards. It was true years ago in steel, when Nucor (NYSE:NUE) pioneered a new model, and it's true, at least to some extent, in containerboard (boxes) with Packaging Corp (NYSE:PKG).

A Good End to the Year, Relatively Speaking 

At first glance, Packaging Corp's earnings aren't going to look all that great. Revenue rose just 4% on a 0.2% increase in containerboard production and 7% increase in box shipments. Given that industry prices were not very strong in the second half of the year, that was a pretty good result for Packaging Corp and a little better than the Street was expecting.

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Investopedia: Rock-Tenn Still Rolling

Packaging is typically a difficult business. After all, most things that need a package already have them, and customers are always pushing for new designs that eliminate materials and cut costs. What's more, it's a business that relies on difficult-to-control commodity inputs like natural gas, wood and wastepaper, and plenty of companies have wrecked industry pricing in the past by gorging on debt-fueled capacity only to cut prices to keep those factories running.

Against that depressing backdrop, Rock-Tenn (NYSE:RKT) stands out as a different sort of company. Rock-Tenn has often been an unusually efficient operator, and a leader in niches, like in-store displays. Now, with the large Smurfit-Stone acquisition, Rock-Tenn management has the opportunity to leverage their skills over a much larger business, and drive larger returns for shareholders.

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http://stocks.investopedia.com/stock-analysis/2011/Rock-Tenn-Still-Rolling-RKT-IP-PKG-TIN-BZ-GPK-MWV-NSRGY-KFT-GIS1114.aspx

Investopedia: Can ADA-ES Make The Improbable Possible?

"Clean coal" is typically put in the same box as military intelligence or good government - something everybody would like to see, but is ultimately about as good of an investment concept as unicorn ranches. Not for lack of trying, but many clean coal technologies have risen up and then faded away when the real-life results didn't match the lofty promises of controlled bench-top experiments and the cost advantages disappeared in a puff of smoke.


All of that said, ADA-ES (Nasdaq:ADES) keeps trying to crack the code and recent test results have sent the stock back up sharply. The question still remains, though, whether this tiny Colorado company can succeed where so many have failed and where most of the world's chemical companies don't even see value in trying. (For related reading, see Can Business Evolve In A Green World?)

The Latest Hope
ADA-ES recently announced that a new technology called M45 showed some encouraging results in full-scale tests with refined coal. According to the company, M45 lowered NOx emissions by more than 20% and mercury emissions by more than 40%. As the company dutifully noted, this would qualify for special government tax credits that would arguably make the technology interesting from a commercial perspective.


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http://stocks.investopedia.com/stock-analysis/2011/Can-ADA-ES-Make-The-Improbable-Possible-ADES-HW-DOW-DD-GE-APA-WMV0927.aspx

Investopedia: International Paper Wraps Up Temple-Inland

As is so often the case, once again an acquisition target's howls of protest have been soothed by a modest increase in the price of the deal. On Tuesday morning, International Paper (NYSE:IP) announced that it has reached an agreement with Temple-Inland (NYSE:TIN) on a friendly acquisition with a slightly higher price than IP's original bid.

A Small Bump To "Yes"  
International Paper secured the support of Temple-Inland's board by offering $32 a share in cash and the assumption of $600 million in debt - a total deal value of $4.3 billion. At that price, Temple-Inland shareholders are seeing a roughly 30% premium to Friday's close and a trailing EV/EBTIDA valuation of roughly 10 - a slight discount to Rock-Tenn (NYSE:RKT), but a premium to Packaging Corp (NYSE:PKG) and the larger packaging sector.


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http://stocks.investopedia.com/stock-analysis/2011/International-Paper-Wraps-Up-Temple-Inland-IP-TIN-RKT-PKG-MWV-KS-KFT0912.aspx

Investopedia: Industry At A Glance - Packaging

Packaging is scarcely ever noticed, but it is everywhere. A quick trip to the supermarket or pharmacy will show not only the ubiquity of packaging products, but the wide scope of form and function that is available to food, beverage, personal care and healthcare companies. There is certainly a cyclical aspect to the packaging industry and input costs are always significant, but investors may want to give this industry more than just a passing thought. There are certainly some interesting companies out there today and some of these stocks could be interesting at current values.

Ball Corp (NYSE:BLL)  
Ball Corp is quite simply the world's largest metal beverage container manufacturer, with about 40% share (rivals Crown Holdings (NYSE:CCK) and Rexam have roughly 20% share each). Ball's customer list is largely a roster of who's who in the beverage industry - soft drink makers like Coca-Cola (NYSE:KO) and PepsiCo (NYSE:PEP), as well as brewers like Anheuser-Busch InBev (NYSE:BUD). Ball Corp certainly has some vulnerability to higher metal prices, but the company's market position is such that it can pass on at least some of this to its customers. The bigger threat to Ball Corp may be substitution, as plastic containers make further inroads into the beverage sector.


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http://stocks.investopedia.com/stock-analysis/2011/Industry-At-A-Glance---Packaging-BLL-CCK-BMS-MWV-RKT-SEE-ATR0831.aspx

Investopedia: International Paper Makes A Grab For Temple-Inland

Not long after Rock-Tenn (NYSE:RKT) finished its deal for Smurft-Stone, International Paper (NYSE:IP) has decided to make its own play for further consolidation in the packaging business. Late Monday, IP announced that it had launched a hostile offer for Temple-Inland (NYSE:TIN), but Temple-Inland quickly shot down the offer and implemented a poison pill. What remains to be seen now is whether IP can raise the stakes high enough to either persuade the board to change its mind or compel Temple-Inland's own shareholders to rise up and demand approval of the deal. 


The Deal
IP surprised the market with a $30.60 cash bid for Temple-Inland, a price about 46% above the company's prior value. If the deal happens, IP would pick up Temple-Inland's 4 million tons of containerboard capacity, over 2 billion square feet in gypsum wallboard capacity, and significant capacity in other building products like lumber and particleboard. Not only would the deal make the combined company a force in containerboard (with about 39% share) with all the attendant synergies of scale, but it would move IP further into the building products sector. For more, see Smurfit Stone Emerges From The Dead.)

Doth Temple-Inland Protest Too Much?
Poring over the "he said, he said" of the dueling press releases, it seems pretty clear that IP approached Temple-Inland and that Temple-Inland turned them down cold (a unanimous board vote against the $30.60 deal). Of course, as is part and parcel of such rejections, Temple-Inland loaded its response with mock indignation that IP would dare offer such a low price, called the deal opportunistic, complained that IP's comparables are unfair and so on. In other words, standard boilerplate language for a rejection. 



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Can Investors Capture Gains In Carbon Capture?

Carbon capture and storage (CCS) seems to be an inevitable emerging technology over the next few decades. CCS holds the promise of cutting CO2 emissions from power plants by up to 80-90%, while not imposing a crippling cost burden on energy producers and customers. As increased legislation aimed at controlling green house gas emissions seems like a done deal in the years to come, investors should look to see how they might position themselves to profit. 

Look to the Oil FieldsOne of the early adopters of CO2 capture and storage has been the oil and gas industry. Companies including Statoil (NYSE:STO), Kinder Morgan (NYSE:KMP), and Denbury Resources (NYSE:DNR) have been early movers in this field, which involves injecting CO2 far beneath the ground to stimulate better oil and gas production. Kinder Morgan operates CO2 pipelines and reported a few years ago that in the Permian Basin and Mississippi nearly 11 trillion cubic feet of CO2 had been used to generate and incremental 1.2 billion barrels of oil that might otherwise have remained in place.

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