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International Paper (IP) Up 3.8% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for International Paper (IP - Free Report) . Shares have added about 3.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is International Paper due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
International Paper Q2 Earnings Beat, Dip Y/Y on Low Prices
International Paper reported second-quarter 2024 adjusted earnings of 55 cents per share, which surpassed the Zacks Consensus Estimate of 40 cents by 38%. The bottom line declined 7% year over year due to lower year-over-year prices in both the Industrial Packaging and Global Cellulose Fibers segments.
Including one-time items, such as an environmental remediation adjustment, combination costs related to the acquisition of DS Smith, strategic advisory fees and a tax benefit resulting from internal legal entity restructuring, IP posted earnings per share of $1.41 from continuing operations. This compared favorably with earnings of 68 cents per share from continuing operations in the year-ago quarter.
Net sales were around $4.7 billion, up 1% from the year-ago quarter as higher volumes were offset by lower prices. The top line missed the Zacks Consensus Estimate of $4.8 billion.
The adjusted cost of sales was $3.3 billion, down 0.7% from the year-ago quarter's level. Gross profit increased 6% year over year to $1.4 billion.
Adjusted selling and administrative expenses were $424 million, which increased 26% from $336 million in the prior-year quarter. Total segment operating profit decreased 4% year over year to $322 million. Adjusted operating profit was $300 million, which marked an 8% decline from the second quarter of 2023.
Adjusted EBITDA was $561 million compared with $570 million in the year-ago quarter. Adjusted EBITDA margin was 11.9% in the quarter, reflecting a 30-basis point contraction year over year.
Segment Performances
Industrial Packaging: The segment’s sales totaled $3.9 billion, up 1% from last year’s reported figure as an improvement in total volume helped offset lower prices. Operating profit fell 4% year over year to $291 million.
The segment reported corrugating packaging volumes of 2,255 thousand short tons, down 6% from last year’s comparable quarter.
Containerboard volumes were 791 thousand short tons, up 32% from the year-ago quarter's figure. Recycling volumes rose 4.5% year over year to 552 thousand short tons. Volumes in Saturated Kraft were up 11% year over year, and the same for Gypsum /Release Kraft rose 9.8%. EMEA Packaging reported a 1.9% improvement in volumes. Overall, volumes for the Industrial Packaging segment were 4,037 thousand short tons, which rose 2.4% from the second quarter of 2023.
Global Cellulose Fibers: Segmental sales rose 3% year over year to $717 million as higher volumes were negated by lower prices. Operating profit was $31 million, up 3% from the year-ago quarter's figure. The segment has returned to profitability after incurring losses for the past two quarters.
The segment’s volumes were 684 thousand metric tons, which were up 9% year over year.
Cash & Debt Position
Cash and temporary investments aggregated $1.05 billion at the end of the second quarter compared with $1.11 billion at the end of 2023. Throughout the first half of 2024, the company paid $321 million as dividends.
At the end of the reported quarter, IP’s long-term debt was $5.33 billion, lower than $5.46 billion as of 2023-end. Cash flow from operating activities was $760 million in the first half of 2024 compared with $873 million in the first half of 2023. IP generated $311 million in free cash flow in the first six-month period of 2024, higher than $265 million in the comparable period of 2023.
Expectations for Q3
International Paper anticipates volumes in the Industrial Packaging segment to be lower sequentially due to one less day and seasonal factors. Volumes in Cellulose Fibers are also expected to dip due to seasonality.
Lower volumes, combined with higher costs, are expected to offset the benefits from prior price index increases. IP, therefore, anticipates third-quarter earnings to dip from the second-quarter level.
The company stated that it will be making changes to its portfolio, optimizing cost structure and focusing on a customer-driven strategy to deliver profitable growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -62.4% due to these changes.
VGM Scores
At this time, International Paper has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, International Paper has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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International Paper (IP) Up 3.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for International Paper (IP - Free Report) . Shares have added about 3.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is International Paper due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
International Paper Q2 Earnings Beat, Dip Y/Y on Low Prices
International Paper reported second-quarter 2024 adjusted earnings of 55 cents per share, which surpassed the Zacks Consensus Estimate of 40 cents by 38%. The bottom line declined 7% year over year due to lower year-over-year prices in both the Industrial Packaging and Global Cellulose Fibers segments.
Including one-time items, such as an environmental remediation adjustment, combination costs related to the acquisition of DS Smith, strategic advisory fees and a tax benefit resulting from internal legal entity restructuring, IP posted earnings per share of $1.41 from continuing operations. This compared favorably with earnings of 68 cents per share from continuing operations in the year-ago quarter.
Net sales were around $4.7 billion, up 1% from the year-ago quarter as higher volumes were offset by lower prices. The top line missed the Zacks Consensus Estimate of $4.8 billion.
The adjusted cost of sales was $3.3 billion, down 0.7% from the year-ago quarter's level. Gross profit increased 6% year over year to $1.4 billion.
Adjusted selling and administrative expenses were $424 million, which increased 26% from $336 million in the prior-year quarter. Total segment operating profit decreased 4% year over year to $322 million. Adjusted operating profit was $300 million, which marked an 8% decline from the second quarter of 2023.
Adjusted EBITDA was $561 million compared with $570 million in the year-ago quarter. Adjusted EBITDA margin was 11.9% in the quarter, reflecting a 30-basis point contraction year over year.
Segment Performances
Industrial Packaging: The segment’s sales totaled $3.9 billion, up 1% from last year’s reported figure as an improvement in total volume helped offset lower prices. Operating profit fell 4% year over year to $291 million.
The segment reported corrugating packaging volumes of 2,255 thousand short tons, down 6% from last year’s comparable quarter.
Containerboard volumes were 791 thousand short tons, up 32% from the year-ago quarter's figure. Recycling volumes rose 4.5% year over year to 552 thousand short tons. Volumes in Saturated Kraft were up 11% year over year, and the same for Gypsum /Release Kraft rose 9.8%. EMEA Packaging reported a 1.9% improvement in volumes. Overall, volumes for the Industrial Packaging segment were 4,037 thousand short tons, which rose 2.4% from the second quarter of 2023.
Global Cellulose Fibers: Segmental sales rose 3% year over year to $717 million as higher volumes were negated by lower prices. Operating profit was $31 million, up 3% from the year-ago quarter's figure. The segment has returned to profitability after incurring losses for the past two quarters.
The segment’s volumes were 684 thousand metric tons, which were up 9% year over year.
Cash & Debt Position
Cash and temporary investments aggregated $1.05 billion at the end of the second quarter compared with $1.11 billion at the end of 2023. Throughout the first half of 2024, the company paid $321 million as dividends.
At the end of the reported quarter, IP’s long-term debt was $5.33 billion, lower than $5.46 billion as of 2023-end. Cash flow from operating activities was $760 million in the first half of 2024 compared with $873 million in the first half of 2023. IP generated $311 million in free cash flow in the first six-month period of 2024, higher than $265 million in the comparable period of 2023.
Expectations for Q3
International Paper anticipates volumes in the Industrial Packaging segment to be lower sequentially due to one less day and seasonal factors. Volumes in Cellulose Fibers are also expected to dip due to seasonality.
Lower volumes, combined with higher costs, are expected to offset the benefits from prior price index increases. IP, therefore, anticipates third-quarter earnings to dip from the second-quarter level.
The company stated that it will be making changes to its portfolio, optimizing cost structure and focusing on a customer-driven strategy to deliver profitable growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -62.4% due to these changes.
VGM Scores
At this time, International Paper has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, International Paper has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.