NEW YORK (CNN/Money) -
Prudential Financial initiated coverage Wednesday of International Paper, a Dow component, as a "sell" with a $27 per share price target, and rated the overall paper and forest industry as "underperform."
In a research note, Prudential analyst John Tumazos blamed overseas competition and high debt level for the bearish ratings on the paper products makers, and added that he does not believe the paper and forest products industry is worth $150 billion enterprise value. "We do not anticipate a quick recovery to $10 billion plus earnings levels to sustain current valuations."
He said International Paper (IP: down $1.21 to $43.42, Research, Estimates) trades at a premium EBITDA multiple of 11.5, higher than other commodity cyclicals, adding "Its $16 billion net debt level and cash flow are out of balance."
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Eight of the 30 Dow components currently have a "sell" rating from Wall Street brokerages, and of those eight, only Eastman Kodak (EK: down $0.89 to $31.11, Research, Estimates) has two "sell" ratings, according to First Call.
In addition to the initial coverage of IP, Plum Creek (PCL: down $0.94 to $29.65, Research, Estimates), MeadWestvaco (MWV: down $0.50 to $35.14, Research, Estimates) and Bowater (BOW: down $0.89 to $51.60, Research, Estimates) all received a "sell" as their initial rating from Prudential .
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