Wells Fargo expects a U-shaped recovery for the container/packaging sector.
“We believe it will be a period of quarters (and in some cases years) versus months before business activity and employment will normalize (think dining out in densely populated cities). Accordingly, we are revising our estimates to reflect a drop off in both semi-discretionary and industrial end markets similar to the Great Recession,” advises the firm. On the positive side, WF anticipates a favorable impact to containerboard consumption from an increase in spend through the grocery channel as well as E-commerce.
Looking ahead, a $25/ton price decline is seen occurring sometime during Q3, although Wells leaves open the possibility that the grocery demand burst could sustain pricing.
Wells Fargo has an Overweight rating on Greif (GEF -1.0%) and WestRock (WRK +4.4%), while International Paper (IP +3.9%), Packaging Corp of America (PKG +2.2%) and Sonoco Products (SON +2.7%) are lined up at Equal Weight.