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International Paper (IP) Beats on Q3 Earnings & Revenues

Supriyo Bose
Updated

Paper and packaging firm International Paper Company IP reported relatively healthy third-quarter 2017 results with adjusted operating earnings of $449 million or $1.08 per share compared with $380 million or 91 cents per share in the year-ago quarter. Operating earnings also exceeded the Zacks Consensus Estimate by 4 cents.

GAAP earnings for the quarter were $395 million or 95 cents per share compared with $312 million or 75 cents in the year-ago quarter, primarily driven by top-line growth.

Net sales improved to $5,913 million in the reported quarter from $5,266 million in the year-ago quarter and exceeded the Zacks Consensus Estimate of $5,908 million. The year-over-year increase was primarily due to benefits from the pulp business that was acquired in late 2016.

International Paper Company Price, Consensus and EPS Surprise

 

International Paper Company Price, Consensus and EPS Surprise | International Paper Company Quote

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Total business segment operating profit in the reported quarter was $707 million compared with $613 million in third-quarter 2016. The significant year-over-year increase in operating profit was largely attributable to higher revenues.

Segment Performance

Industrial Packaging: Sales from this segment increased to $3,734 million from $3,491 million in the year-ago period. Operating profit improved to $469 million from $423 million in the year-ago quarter. In North America, sales price increase realizations for containerboard and boxes and lower mill outage expenses led to higher profits.  

Printing Papers: Sales from this segment were $1,039 million in the reported quarter versus $1,019 million in the year-earlier quarter. Operating profit for the segment was $135 million versus $167 million in the year-ago quarter due to sales price erosion in North America and lower sales volume and unfavorable foreign exchange in Brazil.

Consumer Packaging: Sales from this segment decreased to $491 million from $494 million in the prior-year quarter. Operating profit was $54 million compared with $61 million in the year-ago quarter due to annual outage expenses.

Global Cellulose Fibers: Sales from this segment were $654 million compared with $242 million in the prior-year quarter due to higher fluff pulp sales volume as global demand remained strong. Operating profit was $49 million compared with operating loss of $38 million a year ago, largely driven by greater synergy benefits, favorable pricing and lower planned maintenance outage expenses.

Balance Sheet

As of Sep 30, 2017, cash and temporary investments aggregated $998 million while long-term debt was $11,373 million. Cash flow from operating activities for the first nine months of the year was $569 million compared with $1,566 million in the prior-year period. Free cash flow for quarter was $624 million compared with $575 million in the prior-year period, bringing the respective tallies for the first nine months of 2017 and 2016 to $1,238 million and $1,413 million.

Moving Forward

International Paper expects solid traction in the future with price increases, acquisition synergies and significantly lower outage expenses, thereby remaining confident to achieve its full year earnings target. Management expects a positive momentum entering 2018.

International Paper currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Veritiv Corporation VRTV, Stora Enso Oyj SEOAY and WestRock Company WRK, each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Veritiv has a long-term earnings growth expectation of 21.9%.

Stora Enso has a long-term earnings growth expectation of 9.4%.

WestRock has a long-term earnings growth expectation of 7.5%.

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International Paper Company (IP) : Free Stock Analysis Report
 
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