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Baird analysts are positive about packaging and ingredients and the additives subsector, which already felt a recession on volume metrics last year.
The current outlook for inflation and higher interest rates should do so, according to an Equity Research Morning Report released Tuesday be advantageous for painters.
Analysts see the theme of global growth and rising costs playing out during the first-quarter earnings season, specifically: broad-based earnings outperformance driven by margins; improvement in coating volumes, especially in China and emerging markets; earnings guidance intact for 2024; stability of volumes for the packaging subsector; and indications of “a second-stage inflationary impulse permeating cost curves,” analysts said.
Additionally, Baird analysts say “a directional reassessment of risk is needed, given the greater decline in costs and the reality that higher costs could underpin higher interest rates for a longer period.”
Analysts recommend shedding coaters if there is initial earnings optimism and turning to selective packagers, as crude oil (CL1:COM) or resin could weigh on margins or earnings prospects for larger plastic packagers. pure.
Baird’s top picks in the subsector are International Flavors & Fragrances Inc. (NYSE:IFF), Crown Holdings Inc. (NYSE:CCK) and AptarGroup, Inc. (ATR).