RockTenn Company (RKT) has surprised on the Zacks Consensus Estimate 3 out of the last 4 quarters and has posted record earnings in both the first and third quarters. Can the company do it again when it reports fourth quarter in November?

Company Description

RockTenn manufactures packaging products, bleached and recycled paperboard and merchandising displays. The company has over 200 facilities located in 26 states, Canada, Mexico, Chile and Argentina.

Analysts Bullish on Fiscal Fourth Quarter

The company recently exhibited some pricing power after saying in late July that the paperboard and container board pricing had stabilized in the prior weeks. On Aug 10 it announced a $40 per ton price increase on all grades of coated and uncoated recycled paperboard effective Sep 10.

Since the third quarter report in July, which saw the company report record earnings, the fourth quarter Zacks Consensus Estimate has jumped 40% to $1.19 from 85 cents.

The full-year 2009 Zacks Consensus Estimate climbed 88 cents to $4.61 per share in the last two months.

RockTenn is scheduled to report fiscal fourth quarter 2009 earnings on Nov 10.

RockTenn Posted Record Earnings Per Share in the Third Quarter

On July 27, RockTenn reported fiscal third quarter earnings that surprised on the Zacks Consensus Estimate by 61.80%. Earnings per share were $1.44 compared to the Zacks Consensus Estimate of 89 cents. This also easily bested last year’s third quarter earnings of 70 cents.

Sales fell 8.7% to $703.9 million from $771 million in the third quarter of 2008.

However, the company saw improvement quarter over quarter as total tons shipped rose 5.7% compared to the second quarter. Consumer and corrugated packaging operations performed better than expected.

Value Fundamentals

RockTenn is a Zacks #1 Rank (strong buy) stock. The stock is attractively valued, with a forward P/E of 10.71. It is trading with a price-to-book ratio of 2.45.

The company also has a solid 5-year average return on equity (ROE) of 11.65%. As an added bonus, the company also pays a dividend with a current yield of 0.80%.

Zacks Investment Research
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