2 Containers - Paper and Packaging Stocks to Buy Despite Industry Woes

Why It Matters

Even as the broader packaging industry faces weak demand and high costs, these two firms demonstrate resilient earnings and attractive valuations, making them compelling picks for investors seeking upside in a depressed sector.

Key Takeaways

• Karat Packaging posted 34% gross margin amid higher tariffs
• Karat shares rose 18.4% year‑to‑date, earnings forecast 25.5% growth
• Brambles achieved 23.7% share gain, margin expansion from efficiency gains
• Brambles earnings expected 11.8% growth, Zacks Rank #2 (Buy)
• Industry EV/EBITDA 11.29×, well below S&P 17.76×, indicating valuation gap

Pulse Analysis

The Containers‑Paper and Packaging industry is wrestling with a post‑pandemic slowdown, as inflation‑driven consumer restraint and higher tariffs have squeezed volumes and margins. Valuation metrics underscore the pressure: a trailing‑12‑month EV/EBITDA of 11.29× lags far behind the S&P 500’s 17.76×, hinting at a potential discount opportunity for savvy investors. Yet the sector’s exposure to e‑commerce and sustainable packaging trends offers a counterbalance, as online retailers demand robust, recyclable solutions to protect shipments and meet eco‑conscious consumer expectations.

Karat Packaging (KRT) stands out by leveraging a diversified sourcing model that preserved a 34% gross margin despite tariff headwinds. The company’s new paper‑bag line and a marquee contract with a national retailer have driven double‑digit volume growth, while its online sales push adds a modern distribution channel. Analysts now project a 25.5% earnings surge for 2026, and the stock’s 18.4% rally over the past year reflects market confidence in its growth narrative and Zacks Rank #1 (Strong Buy) designation.

Brambles Limited (BXBLY) has taken a different but equally effective route, focusing on operational efficiency and digital transformation. By tightening pallet delivery cycles, cutting complaint resolution times, and investing in quality improvements, Brambles has expanded margins and generated robust cash flow, supporting a 23.7% share price increase. The firm’s earnings outlook shows an 11.8% rise year‑over‑year, earning it a Zacks Rank #2 (Buy). Together, these two stocks illustrate how targeted strategic moves can deliver outsized returns even when the broader packaging market lags, offering investors a rare blend of growth and value in a sector poised for a longer‑term rebound.