Can These Companies Package up Tidy E-tail Profits? – United Parcel Service, Inc. (UPS), FedEx Corporation (FDX)

But caution may be warranted here. Sealed Air’s revenue for the last quarter was largely flat over the fourth quarter of 2011, and its expectations for 2013 are not for significant growth. Revenue expectations are flat to marginally higher. Given that the recent run-up leaves Sealed Air with a forward PE of more than 20, there’s not enough cushion built into this stock right now for me to be a buyer.

Packaging powerhouse

That brings us to our final packaging play on the e-tail megatrend: International Paper Company (NYSE:IP). IP is America’s leading supplier of corrugated packaging and paperboard. The company has achieved slow but steady growth. Revenues were up by about 6.4%, on average, over the past three years. It carries an unattractive price-to-earnings multiple of near 27. But analysts expect the company to earn $3.68 a share in 2013, well beyond 2012’s $2-per-share earnings. That would put the forward-PE around 12.5.

IP expects demand for corrugated packaging in the U.S. to grow, but only by a little more than 1% per year over the next five years. But IP successfully increased prices in its containerboard and box businesses last year. It expects to reap the benefit of that in 2013, it says.  In 2012, the company shed $2 billion in debt while improving revenues by more than 10%  last quarter, year-over-year. It also increased its dividend by 14%. It now pays around 2.65%.

IP says it will continue to improve its already strong cash flow, which should give it the ability to continue raising that dividend for shareholders.

Let’s wrap it up

With revenues expected to march upward at what’s best a slow and steady pace, none of these packaging producers looks like a compelling growth story. But Bemis and International Paper still look like solid investments, each with a long history of execution and innovation, as well as solid — and steadily growing — dividends.

But while these companies give investors an opportunity to get a piece of the e-tail pie, none of the three offers much more than a sliver. If you like one of these picks, e-tail notwithstanding, by all means investigate further. If it’s the e-tail trend you’re looking to capitalize on, however, there may be better opportunities to be had.

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