Seeking Alpha reports that Bank of America Securities raised its ratings on Silgan Holdings (NYSE:SLGN) and International Paper (NYSE:IP) to Buy from Neutral, citing attractive valuations and stronger-than-expected containerboard pricing that could offset operational headwinds.

 

The call follows a volatile second-quarter earnings season, in which packaging and paperboard stocks fell about 5% since June 30, underperforming the Standard & Poor’s 500 stock index (SP500). Analyst George Staphos said recent price action has created opportunities in the sector as investors cautiously shift back to a more “risk-on” posture.

 

Silgan: Pullback creates entry point
Silgan (NYSE:SLGN) shares dropped more than 15% after the company lowered earnings guidance, citing weak beverage closure volumes and a food-can customer bankruptcy. Staphos argued the sell-off was overdone, given the company now trades at roughly 11 to 12 times forward earnings, below peers that average closer to 14 times.

 

While defensive elements remain because of food cans, the analysts said they believe the downside is priced in and they see room for volumes to improve. Bank of America also highlighted upside for other packaging names, including Sealed Air (SEE), Sonoco Products (SON) and Graphic Packaging Holding (GPK).

 

International Paper: Pricing offsets execution risk
For International Paper (NYSE:IP), Bank of America acknowledged ongoing execution risk following its pulp divestiture and restructuring efforts. Still, the firm sees pricing power as a decisive factor. The bank lifted its 2026 forecasts, adding another $40 per ton increase in the third quarter of 2026 on top of an earlier $40 per ton bump for the first quarter. Its projected $60 per ton rise is well above consensus estimates of $20 to $30, according to Visible Alpha data cited by the bank.

 

Operating rates should exceed 95% by 2026, and if the bank’s pricing assumptions hold, that will more than offset near-term operational challenges, Staphos said. Packaging Corp. of America (PKG), already rated Buy, stands to benefit even more directly given its cleaner profile without restructuring complications.
Sector still acts like ‘bonds in disguise’

 

Despite pricing momentum, Bank of America cautioned that aggregate volume growth in packaging remains sluggish, averaging just 1% to 3% since the sector’s recession ended in late 2023. Staphos reiterated his longstanding view that packaging stocks often behave “like bonds masquerading as equities,” delivering strong cash flows but limited growth. Value creation, he added, depends on disciplined capital allocation and shareholder returns, rather than large-scale acquisitions unless tied to commercial gains.

 

With the upgrades, Bank of America now holds Buy ratings across all three containerboard producers it covers: International Paper (IP), Packaging Corp. of America (PKG) and WestRock rival Graphic Packaging (GPK). The ratings reflect a more optimistic stance on sector fundamentals heading into 2026.

 

Source: Seeking Alpha