On an industrial scale, paper-products manufacturers have cut, spliced and suffered over the past decade to consolidate and streamline. The process netted a leaner, meaner, more competitive industry. And it concentrated the majority of production in what had been a vastly fragmented North American market within a handful of companies in each paper and board segment. A more disciplined market points to more stability and higher profitability for an industry that's struggled against poor returns and over-capacity, adds Vertical Research Partners analyst Chip Dillon.

Analysts say the Lake Forest, Ill. Graphic Packaging Holding GPKa top producer of folding cartons, has also benefited. Analyst consensus projects a fourfold earnings gain in the fourth quarter. The group ranked No. The industry is not a treasure trove of leading stocks. But the group is a sensitive indicator of economic activity, and a turnaround story that appears set to exit the recent economic recession stronger than when it went in.

Cardboard Box Index

That story, and Packaging Corp. It's the industry's only pure play in the containerboard segment, says Wenning. Its position as a North American producer gives it direct access to virgin fiber — from the tree to the box, so to speak. That keeps its costs pretty steady, Wenning adds. In addition, says Jefferies analyst Philip Ng, the company has squeezed a lot of costs, like energy consumption, out of its operations.

That is part of what has helped boost earnings this year. Wenning expects benefits from the fall price increase to begin feeding through in fourth-quarter results. It reports on Jan. Graphic Packaging, headquartered in Marietta, Ga. Products include cereal boxes, paperboard packaging for beer, soft drinks and other beverages. Major long-term customers include Kraft Foods KRFTAnheuser-Busch BUD and General Mills GIS.

Graphic Packaging benefits from the market's built-in demand, mainly from the food and beverage companies. Also, the company has been growing market share, executing well, and taking costs out of its system, says Ng. In another segment of the industry, Schweitzer-Mauduit International SWM is the world's largest producer of the fine paper used in making cigarettes.

The company held an estimated 2. But, as in many industries, "declining demand in the U. What changed to allow them to push through the increase? Containerboard supply has been tight due to mill maintenance and project outages, unexpected operational problems at major mills and some market downtime, says Mies.

At the same time, containerboard inventory levels at box plants and mills have been at multidecade lows. Certain areas of the paper industry are doing quite well, including containerboard for boxes, says Wenning. Year-to-date box shipments as of Dec. Over the five years cardboard boxes stock marketrevenue for the cardboard box and container chinese stock market crash explained industry rose at an annualized rate of 0.

Demand for cardboard packaging began to turn the corner inand has continued to rise throughshe says.

World Corrugated Boxes Market - TheStreet

Steady demand from food and beverage manufacturers has kept the industry afloat over the five-year period. In addition, auto manufacturing has increased since the recession. Over the three years toconsumer spending is estimated to have risen an average of 2. An increase in activity from these downstream industries has benefited demand for cardboard packaging during the industry's recovery.

Inrevenue is expected to rise 4. When it comes to assessing the climate for the industry, much depends on the sustainability of the economic recovery. The industry, says Wenninghas done a forex magic wave strategy job of managing supply and getting it closer to demand.

There's only forexpros usd iqd far they can cut. Demand will have to improve for there to be outsized growth in the industry again. Most watchers are cautious about the outlook for the stock performance of companies in the space.

He calls a "transition" year. Still, he says, a lot of investors don't appreciate how much these companies have improved. Ng is generally "upbeat" on the companies he follows. He has a buy rating on Graphic Packaging and a hold on Packaging Corp.

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Visit the IBD Store to get started. Paper cuts come in all sizes. It's a very well run company, says Ng, and it has executed "flawlessly. Market There's not a lot of innovation going on in the paper market, says Wenning. It's all about making sure plants are running efficiently, and not over- or underproducing. Outlook When it comes to assessing the climate for the industry, much depends on the sustainability of the economic recovery. Dillon says he's upbeat about the year's prospects for Graphic Packaging and Packaging Corp.

Wenning concurs he's seen improvement in the industry. Start a 2-week FREE trial. Get instant access to IBD videos. IBD Stock Charts IBD Stock Checkup Stock Quotes CAN SLIM Advisors MarketSmith How to Buy Stocks How to Read Stock Charts When to Sell Stocks IBD Retail Locations Ad Choices.

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