Growth & Income: Rock-Tenn (RKT)

Rock-Tenn Company (RKT) is currently enjoying strong pricing power as the economy continues to improve. This will lead to additional upward revisions to its earnings estimates.

Growth and Income

The company is expected to grow its earnings per share 10.0% over the long term. The stock also offers investors a dividend yield of 1.2%.

This Zacks #1 Rank stock trades at 12.4x fiscal year 2010 consensus EPS estimates and 9.4x fiscal year 2011 consensus EPS estimates.


Rock-Tenn Co. manufactures and sells packaging products, recycled paperboard, containerboard, bleached paperboard, and merchandising displays worldwide.

Recent News

On July 1, Rock-Tenn announced a $60 per ton price increase on all grades of containerboard. The price increase is effective for August 2010 orders. This follows its previous $60/ton increase in April 2010.

On April 27, Rock-Tenn announced fiscal third-quarter results. The company reported net sales of $731.9 million for the second quarter of fiscal 2010, an increase of 8.2% compared to the second quarter of fiscal 2009. RKT earned $0.70 per share, beating the Zacks Consensus Estimate by 15 cents, or 27.3%.

Chairman and CEO James Rubright stated, “Rock-Tenn achieved another quarter of strong earnings and cash flow generation as sales volumes rose over the prior year quarter mitigating the impact of higher recycled fiber costs, which peaked late in the month of March. Our net debt repayment and dividends during the quarter were $88.3 million and $5.8 million, or a total of $48.2 million ($1.24 per share) after excluding the effect of alternative fuel tax credits.”


In the last month, the Zacks Consensus Estimate for 2010 is up 3 cents, or about 1.0%, to $4.22, and the Zacks Consensus Estimate for 2011 increased 25 cents, or 4.7%, $5.57.

The Chart

RKT shares experienced a deep sell-off from the end of 2009 through Feb 2010. After that sell-off, the stock rebounded and made it through the April-July sell-off. The stock hit a new 52-week high in early June and now trades about 7% off its recent highs.

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