DA Davidson upgraded packaging maker International Paper (IP) to Buy from Neutral, saying that the company is benefiting from successful containerboard price increases, strong box shipments and a rebound in its pulp business.

PRICES, BOX SHIPMENTS: Two increases in containerboard prices were successfully implemented since International Paper reported its fourth quarter results, noted DA Davidson analyst Steven Chercover. Meanwhile, box shipments increased 3% in the first half of the year, he added. PULP BUSINESS, MIX: The earnings before interest, taxes, depreciation and amortization of International Paper's pulp business should jump 42% in fiscal 2018 after fluff prices rose, the analyst stated. Additionally, fluff looks poised to make up a higher percentage of the company's revenue going forward, boosting the company's overall results, according to Chercover.

OVERALL OUTLOOK: International Paper's overall comp sales should resume increasing this quarter and its profits should rise by 19% in Q3, which would be the first increase in its profits in six quarters, according to Chercover. Moreover, the stock's multiple should increase as investors become more confident in the company's containerboard business and it generates strong free cash flow, Chercover predicted. He kept a $62 price target on the stock.

PRICE ACTION: In morning trading, International Paper rose 2.2% to $53.75. Other packaging makers also climbed, with KapStone Paper (KS) advancing 1.4% to $22, Packaging Corp of America (PKG) rising 1% to $108.60, and WestRock (WRK) adding 1.5% to $56.45.