NEW YORK (TheStreet) -- Rock-Tenn Co. (RKT) was upgraded to "buy" from "hold" at Keybanc on Thursday.

The firm said it raised its rating on the integrated manufacturer of corrugated and consumer packaging based on its belief the company's merger with MeadWestvaco Corp. (MWV) makes sense both strategically and financially.

The two companies announced the merger on Monday stating that the transaction has a combined equity value of $16 billion.

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Keybanc said it "thought highly" of the deal when it was announced and believes the merger will go through, though it is uncertain about the timing.

Keybanc has a $75 price target on Rock-Tenn stock.

Shares of Rock-Tenn are down by 0.80% to $64.73 at the start of trading this morning. 

Separately, TheStreet Ratings team rates ROCK-TENN CO as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ROCK-TENN CO (RKT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RKT's revenue growth has slightly outpaced the industry average of 4.8%. Since the same quarter one year prior, revenues slightly increased by 4.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, RKT's share price has jumped by 39.03%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RKT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $402.70 million or 29.94% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.10%.
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • ROCK-TENN CO's earnings per share declined by 11.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ROCK-TENN CO reported lower earnings of $3.29 versus $4.97 in the prior year. This year, the market expects an improvement in earnings ($4.15 versus $3.29).
  • You can view the full analysis from the report here: RKT Ratings Report

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