International Paper Company: A Resilient Player in the Market
With a market cap of $20.4 billion, Memphis, Tennessee-based International Paper Company (IP) stands as a global leader in renewable fiber-based products. The company focuses on the packaging and pulp sectors, offering a wide range of products, including corrugated packaging and cellulose fibers used in personal care and hygiene items.
Stock Performance: Strong Growth Against Market Trends
Over the past 52 weeks, shares of International Paper have greatly outperformed the market. IP has jumped 71.3% during this period, contrasting sharply with the S&P 500 Index’s ($SPX) 35.8% gain. In 2024 alone, IP’s stock rose by 62.7%, while SPX saw a more modest 24.3% increase year-to-date.
Focusing on narrower comparisons, IP also outperformed the Materials Select Sector SPDR Fund’s (XLB) 21.1% rise over 52 weeks, along with an 11% increase year-to-date.
Strategic Moves Boost Profitability
The company has been enhancing efficiency and profitability by divesting low-margin divisions, such as its cellulose operation, potentially generating significant proceeds. Additionally, a focus on commercial execution and a recovering demand environment have bolstered investor confidence.
Recent Earnings Report: Mixed Results
On October 31, the stock surged 13.3% after reporting Q3 adjusted earnings of $0.44 per share, which significantly exceeded analysts’ expectations despite a 31% year-over-year earnings decline due to lower volumes and higher costs. Revenue climbed 1.6% year-over-year to $4.69 billion, surpassing estimates, as price hikes in Industrial Packaging countered volume declines influenced by seasonal trends and contract changes. Investor sentiment has also improved with the announcement of IP’s acquisition of DS Smith, intended to strengthen its European packaging business and yield at least $514 million in annual pre-tax synergies.
Future Prospects and Analyst Sentiment
Looking ahead, analysts project IP’s EPS to decline 33.3% year-over-year to $1.44 per share for the current fiscal year ending in December. The company has had a mixed record of earnings surprises, beating consensus estimates in three of the last four quarters, while missing once.
The consensus rating among nine analysts covering the stock currently suggests a “Moderate Buy.” This includes five “Strong Buy” ratings, one “Moderate Buy,” and three “Holds.”
This outlook is slightly more optimistic than three months ago, when there were four “Strong Buy” ratings. On November 2, RBC Capital’s analyst Matthew McKellar adjusted International Paper’s price target to $64 and retained an “Outperform” rating. This adjustment reflects strong progress in IP’s strategic initiatives and expected resilience despite short-term volume fluctuations, with long-term growth anticipated from market recovery and transformation efforts.
As of this writing, IP shares are trading above the average price target of $54.99. The highest target of $66 indicates a potential upside of 12.2% from current levels.
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On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
