The Zacks Paper and Related Products industry has been grappling with subdued demand due to lower consumer spending amid inflation and declining graphic paper demand due to the shift toward digitalization. Elevated costs have added to the woes. However, increasing packaging requirements due to the rise in e-commerce activities and steady demand from consumer-oriented end markets, such as food and beverages, and healthcare, are expected to support the industry. Increasing environmental awareness is boosting the appeal of paper as a sustainable and eco-friendly packaging alternative, serving as a major growth driver.

Companies like Suzano (SUZ Quick QuoteSUZ - Free Report) and Mercer International MERC are likely to gain from the above-mentioned trends.

Industry Description

The Zacks Paper and Related Products industry comprises companies that manufacture and sell paper and paper products. The industry is highly diversified in terms of products, ranging from graphic paper and packaging paper to absorbent hygiene products. Graphic papers, which include printing and writing papers, and newsprint, are utilized for communication purposes. The industry provides packaging solutions for liquid, food, pharmaceutical, beauty, household, commercial and industrial products. It also produces fluff and specialty pulps utilized in absorbent hygiene products, tissues and paper products. The industry caters to a wide array of industries, including food and beverage, farming, home and personal care, health, retail, e-commerce, and transport. The industry players meet customers’ shipping, storage and display requirements with sustainable solutions.

Major Trends Shaping the Future of the Paper and Related Products Industry

Persistent Demand Pressure, Cost Inflation & Tariff Risks: The shift toward digital communication continues to weigh on graphic paper demand, driven by reduced print advertising, electronic billing, email adoption and lower reliance on physical catalogs. In response, companies have increasingly pivoted toward packaging and specialty paper segments to remain competitive. However, even packaging demand has come under pressure amid weaker consumer spending, reflecting ongoing inflationary conditions, leading to volume declines and production curtailments. At the same time, the industry continues to face elevated input costs across transportation, chemicals and fuel, further amplified by geopolitical tensions in the Middle East and broader energy market volatility. Thus, industry players are increasingly focusing on pricing actions and cost reduction, and resorting to automation in manufacturing to boost productivity and efficiency. The impacts of tariffs add to the industry’s concerns.

E-commerce and Consumer-Driven Packaging Growth: Despite the current headwinds, the industry’s exposure to consumer-focused markets, such as food, beverages and healthcare, ensures stable earnings growth. With the rise of e-commerce, packaging has gained the utmost importance as it helps maintain the integrity of the products and withstand the complexities of delivery. E-commerce is expected to surge due to rising internet penetration, widespread smartphone adoption and the convenience of shopping online. Additionally, advancements in digital payments, logistics and personalization are making the online shopping experience faster, safer and more customer-centric. This presents a major growth opportunity for the Paper and Related Products industry.

M&A Activities to Transform the Paper & Packaging Landscape: Increasing demand for sustainable packaging options and eco-friendly packaging solutions will support the paper market in the days ahead. Smurfit Westrock Plc was formed by merging two major paper and packaging industry players, Smurfit Kappa and WestRock in July 2024. In January 2025, International Paper acquired DS Smith, creating a new global leader in sustainable packaging solutions, focusing on the North America and EMEA markets. The merger creates a stronger portfolio of sustainable packaging solutions and enhances offerings, innovation and geographic presence.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Paper and Related Products industry is a 10-stock group within the broader Basic Materials sector. The industry currently carries a Zacks Industry Rank #197, which places it in the bottom 20% of the 243 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bleak prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

Before we present a few Paper and Related Products stocks that investors can consider, it is worth looking at the industry’s stock-market performance and valuation picture.

Industry Versus Broader Market

The Paper and Related Products industry has underperformed the sector and the S&P 500 over the past year. The stocks in this industry have collectively declined 15.4%, while the Basic Materials sector has moved up 30.1%. The S&P 500 composite has grown 25.9% during this time frame.

One-Year Price Performance

 

Industry's Current Valuation

On the basis of the trailing 12-month EV/EBITDA ratio, a commonly-used multiple for valuing Paper and Related Products companies, we see that the industry is currently trading at 7.76X compared with the S&P 500’s 18.39X and the Basic Material sector’s trailing 12-month EV/EBITDA of 13.28X. This is shown in the charts below.

Enterprise Value/EBITDA (EV/EBITDA) Ratio (TTM)

Enterprise Value/EBITDA (EV/EBITDA) Ratio (TTM)

Over the last five years, the industry has traded as high as 11.97X and as low as 5.10X, with the median being 8.28X.

2 Paper and Related Products Stocks to Bet On

Suzano: In June 2025, the company entered into an agreement with Kimberly-Clark Corp. (“KMB”) to form a $3.4 billion joint venture focused on the manufacture, marketing and distribution of consumer and professional tissue products across 70 countries. Suzano will acquire a 51% stake in the venture. The deal, expected to close in the third quarter of 2026, involves 22 tissue plants with an installed annual production capacity of 1 million tons. Suzano is already a leading player in toilet paper in Brazil, following its 2023 acquisition of Kimberly-Clark’s Brazilian tissue assets and brands. Since then, the consumer goods segment has played a more significant role in its paper business results. The company has been steadily growing its presence in the Brazilian market and its paper segment commands 41% of the market share in Brazil. Aligning with its long-term strategy to meet the growing demand for hardwood pulp, Suzano constructed the Ribas do Rio Pardo mill in the state of Mato Grosso do Sul, which is the largest single-line eucalyptus pulp mill in the world. In 2025, the mill completed its first year of operation and produced 2.58 million tons of pulp, exceeding its nominal capacity. Suzano has also expanded its consumer goods operations with a new tissue plant in Aracruz and strengthened its position in fluff pulp with a new line in Limeira, which will quadruple its current production capacity.

The Zacks Consensus Estimate for 2026 earnings for the Salvador, Brazil-based company has moved up 3% in the past 60 days. The company currently carries a Zacks Rank #2 (Buy). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price & Consensus: SUZ

Mercer International: The company continues to progress with its "One Goal One Hundred" program, as part of its broader initiatives to improve its balance sheet and preserve cash. With $11 million in profitability actions delivered in the first quarter of 2026, the cumulative total has reached approximately $41 million since its launch in April 2025. The company has argeted $100 million in cost savings and operational efficiencies by year-end. Operationally, installation of new scanning technology is currently underway at Torgau, which is expected to be operational in the ongoing quarter and increase production of on-grade dimensional lumber. MERC will then scale exports to the U.S. market and redirect existing production into higher-value dimensional products. Within the wood segment, the mass timber order book and commitments grew to approximately $171 million in the first quarter. Notably, the pipeline is becoming increasingly concentrated in large-scale data center infrastructure projects, which now account for roughly 60% of the portfolio. These projects are expected to begin contributing meaningfully to financial results as construction activity ramps up in late 2026 and continues into 2027, providing a potential avenue for growth as demand for data center capacity expands.

The Zacks Consensus Estimate for 2026 earnings has moved up 2.2% over the past 60 days. Vancouver, Canada-based Mercer International currently carries a Zacks Rank of 2.

Price & Consensus: MERC