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6 Paper Stocks With Upside

3. Domtar (UFS - Get Report), is an integrated manufacturer and marketer of uncoated free sheet paper in North America. The company's uncoated free sheet papers and coated ground wood papers are used for business, commercial printing and publishing, and converting and specialty applications. Besides, the company also produces lumber and other specialty and industrial wood products. Domtar own Domtar Distribution Group -- a network of paper distribution facilities.

Of the 15 analysts covering the stock, 60% recommend a buy, while 20% rate a hold. Analysts polled by Bloomberg expect the stock to gain an average 15.9% to $109.3 in the upcoming 12 months.

For the first quarter of 2011, the company recorded adjusted net income of $138 million, or $3.25 per share, as compared to consensus estimates of $2.34 polled by Bloomberg and $69 million, or $1.59 per share, in the year-ago quarter. Additionally, the company revealed that its net cash flow was up $29 million quarter-over-quarter totaling $240 million at the end of March. For the same period, Domtar's debt reduced by $72 million.

In its efforts to turn towards renewable resources for its energy requirements, the company said it will bear additional costs for its share in the proposed biomass plant in Rothschild that would produce both electricity and steam. The $250 million plant will produce 50 megawatts of electricity as well as steam for the company's papermaking operations. Domtar said it would raise its share of the cost by 88% to $47 million.

Looking ahead to 2011, Domtar expects to benefit from the higher prices for softwood pulp and for commercial printing and converting papers. For the first quarter 2011, the company has upped its dividend by 40% to 35 cents per share. Meanwhile, the board has authorized to increase the share buyback program from $150 million to $600 million.
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