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On Jul 20, Zacks Investment Research upgraded Rock-Tenn Company (RKT - Analyst Report), the Norcross, Ga.-based paperboard and packaging company, to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Rock-Tenn is expected to report an earnings beat in fiscal third quarter with an earnings ESP of +1.81%, following an 9.8% earnings surprise in the previous quarter. The third-quarter results are scheduled to be announced on Jul 23. Shares of Rock-Tenn reached a new 52-week high of $108.97 on Jul 11, exceeding the previous high of $108.

In the second quarter, Rock-Tenn reported earnings per share of $1.12, up 15% year over year driven by strong operating performance.

Rock-Tenn raised its cash flow guidance to a new range of $10 to $10.50 per share, indicating increased demand for folding carton and paper for fiscal 2013.  The company also hiked its quarterly dividend by 33% from 22.5 cents per share to 30 cents per share.

Rock-Tenn expects initial cash flow for fiscal 2014 in the band of $10.50 to $11.50 per share, based on expected recovery in containerboard and related box prices.

RockTenn's strong earnings growth reflects continued improvements in its operating performance and higher containerboard and box pricing. Rock-Tenn’s investment in box plants, installation of new standard corrugated box operating system and increase in domestic and export pricing will help to improve its profitability.

Following the second quarter results, over the past 90 days, the Zacks Consensus Estimate for Rock-Tenn has gone up 2% to $6.53, reflecting a 45.85% year-over-year increase. The Zacks Consensus Estimate for 2014 edged up 2% to $9.15.

Other Stocks to Consider

Other stocks with favorable Zacks Rank in the same industry are KapStone Paper and Packaging Corporation (KS - Snapshot Report) with a Zacks Rank #1 (Strong Buy), and Orchids Paper Products Company (TIS - Snapshot Report) and Resolute Forest Products Inc. (RFP - Snapshot Report), both carrying a Zacks Rank #2 (Buy).

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