Morgan Stanley's preferred stocks in the paper and packaging sector

LootboxPhobia · 2026-03-12T18:54:20+00:00

Morgan Stanley recommended UPM and Smurfit Westrock in the paper and packaging sector, believing both have advantages in free cash flow and market positioning. UPM is favored for cost improvements and cash returns, while Smurfit Westrock is noteworthy for capacity adjustments and profit potential.

LootboxPhobia

2026-03-12 18:54:20

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Investing.com – Morgan Stanley has identified its top stocks in the paper and packaging sector, with analysts believing the industry is approaching a cyclical bottom. The firm focuses on companies with strong free cash flow generation and strategic positioning for the next market upswing.

The investment bank’s analysis centers on companies demonstrating cost improvements, operational efficiency gains, and attractive valuation opportunities in the global paper and packaging industry.

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UPM has potential for pulp margin expansion and attractive energy exposure. The company is optimistic about UPM due to its cost improvement initiatives and free cash flow prospects as the paper and packaging sector approaches a cyclical bottom. Analysts believe that as the company returns cash to shareholders, there is potential for attractive revaluation, and investors waiting for industry recovery will be rewarded. Morgan Stanley states that excellent free cash flow generation is a key differentiator for UPM and creates prospects for share buybacks.

Recently, UPM announced that its Leuna biorefinery has begun producing and commercializing industrial sugars, a key step toward producing other advanced biochemicals at the facility.

Smurfit Westrock expects a recovery in the second half, driven by self-help measures and its differentiated US exposure. The company states that due to proactive capacity rationalization, the US containerboard market looks quite attractive. Morgan Stanley expects Smurfit Westrock to benefit from synergies and contract renegotiations during 2026-2027. The investment bank notes that Smurfit Westrock is currently trading at a discount relative to its US peers, offering potential valuation opportunities for investors in the paper and packaging sector.

Smurfit Westrock’s Q4 earnings fell short of analyst expectations, despite revenue roughly meeting estimates. Following the earnings release, Morgan Stanley and Jefferies both raised their target prices for the stock.

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