Sector Snap: Timber, Wood, Paper Stocks Downgraded

NEW YORK (AP) — Shares of timber and wood products companies fell Wednesday after an analyst downgraded three such stocks, all of which she said are relatively expensive, especially in view of near-term challenges.

JPMorgan analyst Claudia Shank Hueston downgraded to "Neutral" from "Overweight" the shares of Montreal-based Domtar Corp., the largest uncoated freesheet maker in North America.

Domtar shares rose 88 percent in the last three months compared with an 84 percent gain in its sector and a 17 percent rise in the S&P 500 index, she said. Further, the company's profitability is vulnerable to the increasing strength of the Canadian dollar.

Hueston also downgraded to "Underweight" from "Neutral" the shares of Seattle-based Plum Creek Timber Co., the largest timber real estate investment trust in the United States.

Plum Creek shares trade at a ratio of enterprise value to free cash flow that is double that of Rayonier Inc., another timber REIT. Hueston has a "Neutral" rating on Rayonier shares.

The analyst downgraded to "Underweight" from "Neutral" the shares of Lake Forest, Ill.-based Packaging Corp. of America, a top maker of cardboard box material. Hueston said the stock trades at a higher ratio of enterprise value to free cash flow than its peers; its price also looks high in relation to estimated 2009 and 2010 earnings.