Bloomberg the Company

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Follow Us

Industry Products

Businessweek Archives

Buyers Size Up A Tidy Package


Inside Wall Street

BUYERS SIZE UP A TIDY PACKAGE

Call it the Comeback Kid: After four years of red ink, Gaylord Container (GCR) will be in the black this year. Analysts have been raising their 1995 and 1996 earnings estimates, but Gaylord, a producer of linerboard and containerboard, may exceed even those revisions, say several big stakeholders.

That's not the only reason investors have been accumulating stock. They say a major paper and forest-products company has been doing homework "in preparation for making a buyout offer for Gaylord," whose shares trade at 10. These pros put Gaylord's takeover value at 20, based on a business pickup--fueled by firming prices and increased demand.

"Gaylord is a pure play in linerboard and containerboard," says one big investor. He notes that several paper companies have been filling billion-dollar war chests for acquisitions. At 20 a share, Gaylord's price tag would be $1.2 billion. "Almost all the industry biggies want to be larger players in linerboard and containerboard, too," this pro says.

One big stakeholder notes that Gaylord, despite recent dire straits, is rebounding smartly, with strong earnings growth (chart). On the other hand, Gaylord's stock is selling at "very cheap price-earnings and price-to-cash-flow ratios," he adds. The stock is trading at 3.7 times the 1995 profit estimate, vs. an average p-e of 8.4 for its peer group, and 3 times the 1996 projected earnings, vs. 6.2 for the group.

This pro figures Gaylord will earn $2.69 a share this year, $3 in 1996, and $3.65 in 1997--way above analysts' estimates. According to Zacks Investment Research, the mean estimates are $2.29 for 1995 and $2.69 for 1996.

Linda Lieberman, an analyst at Bear Stearns, rates the stock an "attractive" buy on fundamentals alone. Her target for the stock price on that basis is 15 to 17 a share. Of note, she says, is the way the company has been paying off debt: In the past two months, Gaylord has paid down $40 million of its bank term loan, and a total of $73 million since January. Gaylord, she notes, has long-term debt of $645 million. Gaylord says it doesn't comment on rumors.BY GENE G. MARCIAL


The Aging of Abercrombie & Fitch
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus