Rock-Tenn (RKT) Stock Closed Down Following New Tax Rule Proposal

NEW YORK (TheStreet) -- Shares of Rock-Tenn Co  (RKT) closed down 2.37% to $61.68 on heavy volume in Tuesday's trading session, after the IRS proposed a new tax rule for packaging companies.

Under the new rule, processing of timber includes making sawdust, untreated lumber and woodchips. This would make the tax break unavailable after chemicals or foreign substances are added and it's turned into paper, pulp and plywood, Bloomberg reports.

Packaging companies will not be able to separate their containerboard operations into tax-advantaged vehicles, Bloomberg added.

Similarly, International Paper (IP) stock closed down 5.19% to $50.95 in today's regular session.

About 4.9 million shares of Rock-Tenn exchanged hands as of 4:02 p.m. ET today, compared to its average daily volume of about 1.35 million shares.

Norcross, GA-based Rock-Tenn is an integrated manufacturer of corrugated and consumer packaging. 

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

"We rate ROCK-TENN CO (RKT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, reasonable valuation levels and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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

  • RKT's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 2.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 36.28% and other important driving factors, this stock has surged by 31.75% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Containers & Packaging industry. The net income increased by 32.6% when compared to the same quarter one year prior, rising from $82.80 million to $109.80 million.
  • ROCK-TENN CO has improved earnings per share by 36.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in 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 ($4.03 versus $3.29).
  • You can view the full analysis from the report here: RKT Ratings Report

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