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Reasons to Hold International Paper (IP) Stock in Your Portfolio
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International Paper (IP - Free Report) is poised to gain from solid demand for corrugated packaging and e-commerce activities in the wake of the coronavirus pandemic. A strong balance sheet and acquisitions also bode well. However, weak demand for printing paper and decline in commercial printing will weigh on the top line.
International Paper currently carries a Zacks Rank #3 (Hold). It has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
International Paper’s shares have gained 9.4% over the past year compared with the industry’s rally of 19.2%.
Positive Earnings Surprise History
International Paper has a trailing four-quarter average earnings surprise of 43.1%.
Estimate Revision Activity
The Zacks Consensus Estimate for current-year earnings per share has been revised upward by 7.5% to $3.88 over the past 30 days.
Solid Growth Projections
The Zacks Consensus Estimate for the ongoing-year earnings indicates year-over-year growth of 38.5%.
Growth Drivers in Place
Pandemic-Driven Demand: The company is witnessing stellar demand driven by processed food, beverage, proteins, chemicals, paper tissue and towel. It will continue to benefit from growing e-commerce demand as it has become a primary spending channel for customers owing to restrictions amid the pandemic. Notably, corrugated packaging plays a critical role in supply chain to bring essential products to consumers. Moreover, the Global cellulose fibers segment is well poised to gain from strong demand for absorbent hygiene products and tissue products amid the pandemic.
Focus on Core Business: International Paper continuously evaluates its operations for improvement opportunities by focusing on core businesses, realigning capacity to operate fewer facilities with the same revenue capability, closing high cost facilities, and trimming costs. Recently, it entered into an agreement to sell the corrugated packaging business in Turkey due to bleak economic conditions in the country. Last December, the company announced its plan to spin off the Printing Papers segment into a stand-alone, publicly-traded company (SpinCo) to focus on the Industrial Packaging segment, and tap the growing demand for corrugated packaging, cut costs and improve earnings. Earlier, the company had divested its consumer packaging business in North America to Graphic Packaging Holding Company (GPK - Free Report) .
M&A Strategy: Mergers and acquisitions remain a key strategy for International Paper to strengthen its packaging business. In North America, the company envisions a large opportunity within its industrial packaging businesses, which continues to generate the best margins in the industry. The company is also taking initiatives to drive margin expansion over time across the business.
Strong Liquidity: International Paper’s efforts to reduce debt levels also appear encouraging. Its total debt has gone down from $11 billion at the end of 2016 to $8.1 billion as of Dec 31, 2020. Moreover, cash and temporary investments aggregated $595 million as of Dec 31, 2020 compared with $511 million as of Dec 31, 2019. The company is committed to a sustainable dividend with a target range of 40% to 50% of free cash flow.
Headwinds to Counter
The pandemic has affected paper consumption in schools, offices and businesses due to the stay-at-home measures implemented to contain the spread of the virus. This will weigh on the company’s results. International Paper has also witnessed unprecedented decline in commercial printing segments due to the significant pullback in print advertising. Furthermore, the transition to digital media has triggered declines in demand for paper and remains a persistent woe.
Apart from this, the company expects elevated input costs on higher recovered fiber, seasonal energy and distribution costs in the current year.
Bottom Line
Investors might want to hold on to the stock, at present, as it has ample prospects for outperforming peers in the near future.
Stocks to Consider
Some better-ranked stocks in the basic materials space are Fortescue Metals Group Limited (FSUGY - Free Report) and BHP Group (BHP - Free Report) , both currently sporting a Zacks Rank of 1.
Fortescue has a projected earnings growth rate of 75.5% for the current fiscal year. The company’s shares have soared 134% in the past year.
BHP has an expected earnings growth rate of 59.5% for the current fiscal year. The company’s shares have gained around 28% over the past year.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Image: Bigstock
Reasons to Hold International Paper (IP) Stock in Your Portfolio
International Paper (IP - Free Report) is poised to gain from solid demand for corrugated packaging and e-commerce activities in the wake of the coronavirus pandemic. A strong balance sheet and acquisitions also bode well. However, weak demand for printing paper and decline in commercial printing will weigh on the top line.
International Paper currently carries a Zacks Rank #3 (Hold). It has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
International Paper’s shares have gained 9.4% over the past year compared with the industry’s rally of 19.2%.
Positive Earnings Surprise History
International Paper has a trailing four-quarter average earnings surprise of 43.1%.
Estimate Revision Activity
The Zacks Consensus Estimate for current-year earnings per share has been revised upward by 7.5% to $3.88 over the past 30 days.
Solid Growth Projections
The Zacks Consensus Estimate for the ongoing-year earnings indicates year-over-year growth of 38.5%.
Growth Drivers in Place
Pandemic-Driven Demand: The company is witnessing stellar demand driven by processed food, beverage, proteins, chemicals, paper tissue and towel. It will continue to benefit from growing e-commerce demand as it has become a primary spending channel for customers owing to restrictions amid the pandemic. Notably, corrugated packaging plays a critical role in supply chain to bring essential products to consumers. Moreover, the Global cellulose fibers segment is well poised to gain from strong demand for absorbent hygiene products and tissue products amid the pandemic.
Focus on Core Business: International Paper continuously evaluates its operations for improvement opportunities by focusing on core businesses, realigning capacity to operate fewer facilities with the same revenue capability, closing high cost facilities, and trimming costs. Recently, it entered into an agreement to sell the corrugated packaging business in Turkey due to bleak economic conditions in the country. Last December, the company announced its plan to spin off the Printing Papers segment into a stand-alone, publicly-traded company (SpinCo) to focus on the Industrial Packaging segment, and tap the growing demand for corrugated packaging, cut costs and improve earnings. Earlier, the company had divested its consumer packaging business in North America to Graphic Packaging Holding Company (GPK - Free Report) .
M&A Strategy: Mergers and acquisitions remain a key strategy for International Paper to strengthen its packaging business. In North America, the company envisions a large opportunity within its industrial packaging businesses, which continues to generate the best margins in the industry. The company is also taking initiatives to drive margin expansion over time across the business.
Strong Liquidity: International Paper’s efforts to reduce debt levels also appear encouraging. Its total debt has gone down from $11 billion at the end of 2016 to $8.1 billion as of Dec 31, 2020. Moreover, cash and temporary investments aggregated $595 million as of Dec 31, 2020 compared with $511 million as of Dec 31, 2019. The company is committed to a sustainable dividend with a target range of 40% to 50% of free cash flow.
Headwinds to Counter
The pandemic has affected paper consumption in schools, offices and businesses due to the stay-at-home measures implemented to contain the spread of the virus. This will weigh on the company’s results. International Paper has also witnessed unprecedented decline in commercial printing segments due to the significant pullback in print advertising. Furthermore, the transition to digital media has triggered declines in demand for paper and remains a persistent woe.
Apart from this, the company expects elevated input costs on higher recovered fiber, seasonal energy and distribution costs in the current year.
Bottom Line
Investors might want to hold on to the stock, at present, as it has ample prospects for outperforming peers in the near future.
Stocks to Consider
Some better-ranked stocks in the basic materials space are Fortescue Metals Group Limited (FSUGY - Free Report) and BHP Group (BHP - Free Report) , both currently sporting a Zacks Rank of 1.
Fortescue has a projected earnings growth rate of 75.5% for the current fiscal year. The company’s shares have soared 134% in the past year.
BHP has an expected earnings growth rate of 59.5% for the current fiscal year. The company’s shares have gained around 28% over the past year.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>