Scott Paper Could Keep On Rolling

Among this year's heavyweights is Scott Paper, which zoomed from 42 in mid-May to 61 on Aug. 3. Some investors, fearful the stock may be peaking, have bailed out. But diehard fans are not giving up. "Scott remains our single best pick in the paper group" despite its rise, says Linda Lieberman of Bear Stearns. She thinks it will hit 75 to 80 in a year.

Much of this optimism is due to new Chairman and CEO Albert Dunlap, who has launched an aggressive restructuring since his appointment in April. The move has included asset sales, cost-cutting, and layoffs of a total of 10,500 employees by the end of 1994.

The world's largest producer of paper tissues and napkins, Scott is also a major maker of coated printing paper and the owner of 2.8 million acres of timberland. Adding to the fire in the stock is the growing speculation that Scott has found a buyer for its coated-paper business. Dunlap has hired Goldman Sachs to evaluate Scott's S.D. Warren unit, which produces commercial-printing and specialty paper.

Rumors are flying that several U.S. and foreign companies, including International Paper, Weyerhaeuser, Mead Paper, and Union Camp, have entered a second round of talks to buy the unit. S.D. Warren is said to be worth $1.5 billion. CEO Dunlap says he's "very pleased with the way the talks are going." There's "a multiplicity of interest in S.D. Warren," he adds.

Analysts give Dunlap high marks for his moves. "Scott's restructuring is one of the most dramatic in U.S. industry," says Kathryn McAuley, an analyst at Brown Brothers Harriman. Lieberman of Bear Stearns has raised her 1995 earnings estimate from $3.85 a share to $4.25, a big jump from 1994's estimated $2.65 and 1993's $1.62.