2 Paper and Related Products Stocks to Watch Despite Industry Headwinds

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. 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 Klabin KLBAY and Stora Enso Oyj SEOAY 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

Weak Demand, High Costs & Tariffs Remain Concerns: The transition to digital media has undermined the demand for the graphic paper market for some time now. Paperless communication, increased use of email, less print advertising, electronic billing and fewer catalogs have dented graphic paper demand. This shift has prompted companies in the industry to convert their production lines to focus on packaging and specialty paper to stay relevant. However, the packaging demand has also lately been impacted and the companies in the industry have been witnessing volume declines due to lower consumer spending on goods. They had to cut down production levels to align with customer demand. The industry is witnessing rising costs for transportation, chemicals and fuel. 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 & Consumer Products to Support Packaging Demand: 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 usage, 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.

Shift Toward Sustainable & Plastic-Substitute Packaging: Sustainability is expected to be the most powerful long-term driver for the industry. Governments, corporations and consumers are increasingly demanding eco-friendly packaging, prompting the shift from plastic to paper-based solutions. Paper is preferred due to its recyclability, biodegradability and alignment with circular economy goals. Increasing demand for sustainable packaging options and eco-friendly packaging solutions will support the paper market in the days ahead.

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 #213, which places it in the bottom 13% of the 244 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 declined 8.0%, while the Basic Materials sector has moved up 34.7%. The S&P 500 composite has grown 22.7% 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 7.04X compared with the S&P 500’s 17.52X and the Basic Material sector’s trailing 12-month EV/EBITDA of 14.63X. 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 12.45X and as low as 5.12X, with the median being 8.29X.

2 Paper and Related Products Stocks to Watch

Klabin: In 2025, the company’s revenues rose 5% year over year to R$20.7 billion, supported by volume growth across all segments. Total sales volume (excluding wood) reached 4,008 million metric tons, up 4%, driven by the ramp-up of paper machines 27 and 28 at the Ortigueira Unit. Adjusted EBITDA increased 7% to R$7.8 billion, mainly reflecting stronger paper and packaging revenues from higher prices and volumes, along with increased pulp volumes. The consolidation of recent investments, including MP27 and MP28, the Piracicaba II (Figueira Project), and integration of Caetê forestry assets, has improved efficiency and enhanced its ability to respond to market conditions. Klabin invested R$2.8 billion during the year, underscoring disciplined project execution while delivering operational efficiency gains. Meanwhile, it has also lowered its debt-to-adjusted EBITDA ratio from 3.9x at the start of the year to 3.3x by year-end, supported by prudent capital allocation and liability management initiatives.

The Zacks Consensus Estimate for the São Paulo, Brazil-based company’s 2026 earnings has moved up 3.7% over the past 60 days to 85 cents per share. It shows a 107% improvement from the earnings reported in 2025. The company has a trailing four-quarter earnings surprise of 62.5%, on average. Klabin has a long-term estimated earnings growth of 9.3% and currently has a Zacks Rank #3 (Hold).

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

Price & Consensus: KLBAY

Stora Enso: In September 2025, the company sold 12.4% of its total forest assets of 175,000 hectares in Sweden for €900 million. Following the divestment, Stora Enso retains more than 1.2 million hectares of forest land in Sweden, with a fair value of approximately EUR 5.6 billion. These assets are planned to be demerged into a new publicly listed entity in 2027, and the company will maintain a stronger focus on renewable materials and packaging. The company’s Oulu site, the largest and most modern consumer packaging board production line in Europe, was inaugurated in September 2025. Ramp-up progressed per plan with increasing production volumes. Even though this phase impacted the company’s profitability during 2025, the Oulu board line will set new industry standards for quality and cost competitiveness once fully operational. It will support SEOAY’s long-term strategy to build market share in renewable and circular packaging solutions, which matter the most to its customers. The company’s proactive initiatives to improve profitability, cash flow and cost competitiveness through activities related to sourcing, operational efficiency, commercial excellence, working capital and fixed costs will aid results in the forthcoming quarters.

The Zacks Consensus Estimate for 2026 earnings for the Helsinki, Finland-based company has moved up 4.6% in the past 60 days. The consensus estimate for Stora Enso indicates year-over-year growth of 47.8%. The company has a trailing four-quarter earnings surprise of 84%, on average. SEOAY currently has a Zacks Rank of 3.

Price & Consensus: SEOAY

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This article originally published on Zacks Investment Research (zacks.com).

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