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International Paper (IP) Down 4.6% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for International Paper Company (IP - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
International Paper Surpasses Q1 Earnings & Revenues
International Paper reported first-quarter 2017 adjusted operating earnings of $249 million or $0.60 per share compared with $330 million or $0.80 per share in the year-ago quarter. Although operating earnings declined year over year, it exceeded the Zacks Consensus Estimate of $0.56.
GAAP earnings for the quarter were $209 million or $0.51 per share compared with $334 million or $0.81 in the year-ago quarter.
Net sales were $5,511 million in the reported quarter compared with $5,110 million in the year-ago quarter and exceeded the Zacks Consensus Estimate of $5,383 million. The year-over-year increase was primarily due to benefits from the pulp business that was acquired in late 2016.
Total business segment operating profit in the reported quarter was $428 million compared with $497 million in first-quarter 2016.
Segment Performance
Industrial Packaging: Sales from this segment increased to $3,499 million from $3,452 million in the year-ago period. Operating profit decreased to $365 million from $396 million in the year-ago quarter. In North America, sales price increase realizations for containerboard and boxes were more than offset by seasonally lower box demand, higher OCC costs and higher mill outage expenses, along with the impact from the Pensacola mill digester incident.
Printing Papers: Sales from this segment were $995 million in the reported quarter versus $972 million in the year-earlier quarter. Operating profit for the segment was $100 million versus $135 million in the year-ago quarter due to seasonally lower domestic sales volumes and unfavorable mix which led to lower earnings in Brazil. Earnings in North America were adversely impacted by higher input costs and maintenance outage expenses.
Consumer Packaging: Sales from this segment decreased to $466 million from $495 million in the prior-year quarter. Operating profit was $33 million compared with $16 million in the year-ago quarter due to seasonally higher volume and lower planned maintenance outage expenses.
International Paper combined its legacy pulp business with the acquired pulp business to form a new business segment called Global Cellulose Fibers. Sales from this segment were $564 million compared with $212 million in the prior-year quarter. Operating loss was $70 million compared with operating loss of $50 million a year ago.
Balance Sheet
On Mar 31, 2017, cash and temporary investments aggregated $998 million while long-term debt was $10,823 million. During the quarter, cash flow from operating activities was $633 million compared with $620 million in the prior-year period. Free cash flow for quarter was $259 million compared with $311 million in the prior-year period.
Moving Forward
Quarterly results reflect $50 million in maintenance outage expenses, including a major energy optimization project at the Port Wentworth mill. Operations and costs were affected by the incident at Pensacola mill digester and a delayed start up at Port Wentworth. The business is starting to benefit from announced price hikes and synergies of $14 million in the quarter from the pulp business buyout.
Management expects strong second half results, as well as positive momentum entering 2018. The company is likely to generate significant year-over-year earnings growth and continued strong cash flow in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter. In the past month, the consensus estimate has shifted downward by 16.1% due to these changes.
At this time, International Paper's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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International Paper (IP) Down 4.6% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for International Paper Company (IP - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
International Paper Surpasses Q1 Earnings & Revenues
International Paper reported first-quarter 2017 adjusted operating earnings of $249 million or $0.60 per share compared with $330 million or $0.80 per share in the year-ago quarter. Although operating earnings declined year over year, it exceeded the Zacks Consensus Estimate of $0.56.
GAAP earnings for the quarter were $209 million or $0.51 per share compared with $334 million or $0.81 in the year-ago quarter.
Net sales were $5,511 million in the reported quarter compared with $5,110 million in the year-ago quarter and exceeded the Zacks Consensus Estimate of $5,383 million. The year-over-year increase was primarily due to benefits from the pulp business that was acquired in late 2016.
Total business segment operating profit in the reported quarter was $428 million compared with $497 million in first-quarter 2016.
Segment Performance
Industrial Packaging: Sales from this segment increased to $3,499 million from $3,452 million in the year-ago period. Operating profit decreased to $365 million from $396 million in the year-ago quarter. In North America, sales price increase realizations for containerboard and boxes were more than offset by seasonally lower box demand, higher OCC costs and higher mill outage expenses, along with the impact from the Pensacola mill digester incident.
Printing Papers: Sales from this segment were $995 million in the reported quarter versus $972 million in the year-earlier quarter. Operating profit for the segment was $100 million versus $135 million in the year-ago quarter due to seasonally lower domestic sales volumes and unfavorable mix which led to lower earnings in Brazil. Earnings in North America were adversely impacted by higher input costs and maintenance outage expenses.
Consumer Packaging: Sales from this segment decreased to $466 million from $495 million in the prior-year quarter. Operating profit was $33 million compared with $16 million in the year-ago quarter due to seasonally higher volume and lower planned maintenance outage expenses.
International Paper combined its legacy pulp business with the acquired pulp business to form a new business segment called Global Cellulose Fibers. Sales from this segment were $564 million compared with $212 million in the prior-year quarter. Operating loss was $70 million compared with operating loss of $50 million a year ago.
Balance Sheet
On Mar 31, 2017, cash and temporary investments aggregated $998 million while long-term debt was $10,823 million. During the quarter, cash flow from operating activities was $633 million compared with $620 million in the prior-year period. Free cash flow for quarter was $259 million compared with $311 million in the prior-year period.
Moving Forward
Quarterly results reflect $50 million in maintenance outage expenses, including a major energy optimization project at the Port Wentworth mill. Operations and costs were affected by the incident at Pensacola mill digester and a delayed start up at Port Wentworth. The business is starting to benefit from announced price hikes and synergies of $14 million in the quarter from the pulp business buyout.
Management expects strong second half results, as well as positive momentum entering 2018. The company is likely to generate significant year-over-year earnings growth and continued strong cash flow in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter. In the past month, the consensus estimate has shifted downward by 16.1% due to these changes.
International Paper Company Price and Consensus
International Paper Company Price and Consensus | International Paper Company Quote
VGM Scores
At this time, International Paper's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.