Sector Snap: Paper And Forest Products Upgraded

NEW YORK (AP) — An analyst upgraded the paper and forest products sector, as well as individual wood products companies, on evidence that many such firms are poised for a rebound.

Goldman Sachs analyst Richard Skidmore raised his rating on the sector to "Neutral" from "Cautious" on prospects that the U.S. housing market has reached a bottom, global lending is up and on stronger manufacturing data — all of which suggest a recovery for paper and forest products companies.

"Producer inventories have been better managed this downturn than previously," Skidmore wrote in an analyst note. "Capacity closures have positioned the industry well for the cyclical rebound. We see corrugated box and wood products demand improving sequentially in the second quarter of 2009."

Within the sector, he prefers companies that produce wood products and containerboard to those that produce paper. Skidmore upgraded International Paper shares to "Buy" from "Neutral" and Louisiana-Pacific Corp. shares to "Buy" from "Sell." The analyst also reiterated his "Buy" rating on Weyerhaeuser Co. stock.

Skidmore cut his 2009 estimate on Sappi Ltd., a large global paper maker on whose shares he has a "Sell" rating, to a loss of 18 cents per share from a loss of 16 cents per share.