Paper & Packaging: Pricing cycle starting to pick up pace, increasing earnings expectations for corrugators; Upgrade International Paper on better risk/reward set-up

Research evidence excerpt

Paper & Packaging: Pricing cycle starting to pick up pace, increasing earnings expectations for corrugators; Upgrade International Paper on better risk/reward set-up

Detlef Winckelmann AC Europe Equity Research

(44-20) 3493-5190 28 July 2026 J P M O R G A N

detlef.winckelmann@jpmorgan.com

earnings of all three corrugated companies that we cover. However, within this peer

group, PKG and IP are the most leveraged to price increases and, in the case of valuation,

IP is particularly leveraged considering its currently depressed earnings, high capex

spend and high levels of financial gearing. For each incremental price/cost improvement

in the US, IP gets cheaper, relative to its closest peer, Smurfit WestRock (analysis in note).

On our numbers, which assume a $50/t linerboard price increase, we see PKG, SW and

IP trading at a 2027 EV/EBITDA of 9.4x, 6.3x and 6.4x, respectively. On an FCF yield

basis, we see PKG, SW and IP trading at 2027 FCF yields of 5.4%, 8.0% and 8.3%,

respectively.

• Upgrade IP to OW but prefer PKG and SW. On our numbers, IP still trades at a

premium to SW which we don’t see as fair and that is one of the reasons we prefer SW

to IP. However, our valuation after incorporating a further $50/t suggests ~43% upside

for IP versus today’s share price. Even if we were to assume no further cost-out or 80-20

improvements (where their track record so far has not been good) we could still justify

upside of ~34%. In our view, this level of upside is sufficient to cater for the potential risk

of guidance downgrades (which consensus already assumes) and near-term earnings risk

(see our preview here). In terms of the pecking order, we maintain our preference for PKG

and SW. In the case of PKG, regardless of the scenario we run, it trades at a 30% premium