Economy Blog

Cramer thinks the packaging industry, which has been struggling of late, is set to embark on a turnaround. He said tighter supplies should help raise prices and Packaging Corp of America (PKG), the sixth largest producer of cardboard and containerboard, should benefit. In early May, International Paper (IP) was the victim of a factory explosion that removed 2% of U.S. capacity. International Paper recently acquired Weyerhaesuer’s (WY) containerboard business, removing even more supply. Cramer pointed out that PKG is a low-cost, high-margin producer because it doesn’t use recycled cardboard, which costs more than virgin fiber. The company also uses less natural gas for its production, providing for even more cost benefits. PKG yields 5.1% and has a $110 million stock buyback plan that makes up 4% of the company’s outstanding shares. Cramer predicted that shares could rise to $33 from its current price of $25 on any economic upswing.
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