International Paper (IP) Surpasses Q1 Earnings & Revenues

Paper and packaging firm International Paper Company IP reported first-quarter 2017 results with adjusted operating earnings of $249 million or 60 cents per share compared with $330 million or 80 cents per share in the year-ago quarter. Although operating earnings declined year over year, it exceeded the Zacks Consensus Estimate of 56 cents.

GAAP earnings for the quarter were $209 million or 51 cents per share compared with $334 million or 81 cents 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.

International Paper Company Price, Consensus and EPS Surprise

 

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

International Paper currently holds a Zacks Rank #2 (Buy). Some other stocks worth considering include Genpact Limited G, US Ecology, Inc. ECOL and ABM Industries Incorporated ABM, each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Genpact has a long-term earnings growth expectation of 12.5% and is currently trading at a forward P/E of 17.1x.

US Ecology has a long-term earnings growth expectation of 5% and is currently trading at a forward P/E of 27x.

ABM Industries has a long-term earnings growth expectation of 8% and is currently trading at a forward P/E of 23.5%.

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