TSC21: Smurfit's Boxes May Hold Key to Recovery

Today's feature on Smurfit-Stone is part of our ongoing coverage of TheStreet.com 21, a new index of 21 companies designed to be a leading indicator of the economy's direction for the rest of the year and beyond. We will profile Smurfit and the rest of the index's components in the coming weeks.

Click here for an introduction to the TheStreet.com 21, and click here for a chart listing the components and their reason for inclusion.

If the economic recovery arrives wrapped up in a tidy little box, Smurfit-Stone Container(SSCC Quote) would probably provide the package.

The manufacturing outlook has been tough to handicap, percolating in fits and starts only to crumble again -- the U.S. manufacturing sector had its fourth-straight month of contraction in June. If and when business improves, box makers would be among the first to benefit, and Smurfit's business outlook will best signal a reversal of fortune -- or more economic doldrums.

The world's largest maker of cardboard boxes makes containers for Canon's(CAJ Quote) printers, Budweiser's(BUD Quote) case shipments, ChevronTexaco's(CVX Quote) Havoline oil cans and a host of Disney's(DIS Quote) products, just to name a few customers. These clients don't keep high inventory levels of boxes, so Smurfit's earnings and outlook will speak volumes about the state of the manufacturing sector and about whether the U.S. economy is indeed picking up.

"If you believe the U.S. economy is going to be reinvigorated by lower interest rates, then Smurfit-Stone is the best way to play it in paper," said Steven Chercover, an analyst at D.A. Davidson. "It's the most pure play on U.S. manufacturing."

The Outlook

When U.S. business is flat, so are Smurfit-Stone's earnings. Indeed, Wall Street expects the company to post a second-quarter loss of 4 cents a share on July 29, according to the Thomson First Call consensus estimate of nine analysts.

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Caterpillar (CAT)	Cisco (CSCO)	Comerica (CMA)
Continental Air (CAL)	Devon Energy (DVN)	Equity Office Properties (EOP)
E*Trade (ET)	Expeditors International (EXPD)	General Electric (GE)
Ingersoll-Rand (IR)	Kohl's (KSS)	Level 3 (LVLT)
Manpower (MAN)	Maytag (MYG)	Smurfit Stone Container (SSCC)
Solectron (SLR)	Tiffany (TIF)	Yahoo! (YHOO)