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International Paper (IP) Down 14% in 3 Months: What Ails It?
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Shares of International Paper (IP - Free Report) have lost 13.6% in the past three months compared with the industry’s decline of 2% so far this year.
The decrease in share price came on the back of weaker-than-expected results in the third quarter of 2022, muted packaging demand impacted by low consumer spending for goods and retail inventory destocking. Elevated energy and distribution costs also weighed on the company’s results.
The company has a market capitalization of around $13 billion. It currently has a Zacks Rank #5 (Strong Sell).
Image Source: Zacks Investment Research
Factors Impacting the Company
On Oct 27, 2022, International Paper reported third-quarter 2022 adjusted earnings of $1.01 per share that missed the Zacks Consensus Estimate of $1.22 by a margin of 17%. The bottom line declined 8% year over year mainly due to weak packaging demand and higher-than-expected energy and distribution costs. The current inflationary pressures have impacted consumers, leading to lower demand for goods. This had a large impact on packaging demand, as consumer priorities have shifted towards non-discretionary goods and services.
Also, IP’s customers and the broader retail channel have been trying to lower their elevated inventories, which further impacted the packaging demand. The company has thus cut down its production levels to align with customer demand, which resulted in significant economic downtime in the quarter for the containerboard system.
Packaging demand is likely to remain impacted in the ongoing quarter as well and is likely to reflect on IP’s results. International Paper has been witnessing higher-than-expected costs for chemicals, energy and distribution. The packaging business in Europe is particularly impacted by a spike in the natural gas prices in the region. Natural gas prices in the region have doubled since the second quarter of 2022 and were about nine times the normal historical levels in the third quarter.
The company is also bearing the brunt of supply-chain challenges and labor constraints. Significant rail, truck and ocean transportation congestion due to challenging transportation conditions has resulted in higher transportation costs. This scenario will continue in the near term. The company projects EBITDA to be around $2.7 billion in 2022, lower than the $3.1-$3.4 billion projected earlier. The company had reported an adjusted EBITDA of $2.6 billion in 2021.
The Zacks Consensus Estimate for IP’s earnings per share is pegged at $3.70 for 2022, indicating year-over-year growth of 15.6%. The estimate for 2023 projects a year-on-year decline of 21.8%. Both estimates have been revised downward over the past 30 days.
Stocks to Consider
Some better-ranked stocks in the basic materials space include Olympic Steel, Inc. (ZEUS - Free Report) , Commercial Metals Company (CMC - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) .
Olympic Steel currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 4.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Olympic Steel’s earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 25.4%, on average. ZEUS has rallied around 25% in the past three months.
Commercial Metals currently carries a Zacks Rank of 1. The consensus estimate for CMC's current-year earnings has been revised 13.8% upward in the past 60 days.
Commercial Metals’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 19.7%, on average. CMC has gained around 18% in the past three months.
Steel Dynamics has a projected earnings growth rate of 36.1% for the current year. The Zacks Consensus Estimate for STLD’s current-year earnings has been revised 7.3% upward in the past 60 days.
Steel Dynamics has a trailing four-quarter earnings surprise of roughly 6.2%. STLD has rallied roughly 29% in the past three months. The company currently carries a Zacks Rank #2 (Buy).
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International Paper (IP) Down 14% in 3 Months: What Ails It?
Shares of International Paper (IP - Free Report) have lost 13.6% in the past three months compared with the industry’s decline of 2% so far this year.
The decrease in share price came on the back of weaker-than-expected results in the third quarter of 2022, muted packaging demand impacted by low consumer spending for goods and retail inventory destocking. Elevated energy and distribution costs also weighed on the company’s results.
The company has a market capitalization of around $13 billion. It currently has a Zacks Rank #5 (Strong Sell).
Image Source: Zacks Investment Research
Factors Impacting the Company
On Oct 27, 2022, International Paper reported third-quarter 2022 adjusted earnings of $1.01 per share that missed the Zacks Consensus Estimate of $1.22 by a margin of 17%. The bottom line declined 8% year over year mainly due to weak packaging demand and higher-than-expected energy and distribution costs. The current inflationary pressures have impacted consumers, leading to lower demand for goods. This had a large impact on packaging demand, as consumer priorities have shifted towards non-discretionary goods and services.
Also, IP’s customers and the broader retail channel have been trying to lower their elevated inventories, which further impacted the packaging demand. The company has thus cut down its production levels to align with customer demand, which resulted in significant economic downtime in the quarter for the containerboard system.
Packaging demand is likely to remain impacted in the ongoing quarter as well and is likely to reflect on IP’s results. International Paper has been witnessing higher-than-expected costs for chemicals, energy and distribution. The packaging business in Europe is particularly impacted by a spike in the natural gas prices in the region. Natural gas prices in the region have doubled since the second quarter of 2022 and were about nine times the normal historical levels in the third quarter.
The company is also bearing the brunt of supply-chain challenges and labor constraints. Significant rail, truck and ocean transportation congestion due to challenging transportation conditions has resulted in higher transportation costs. This scenario will continue in the near term.
The company projects EBITDA to be around $2.7 billion in 2022, lower than the $3.1-$3.4 billion projected earlier. The company had reported an adjusted EBITDA of $2.6 billion in 2021.
The Zacks Consensus Estimate for IP’s earnings per share is pegged at $3.70 for 2022, indicating year-over-year growth of 15.6%. The estimate for 2023 projects a year-on-year decline of 21.8%. Both estimates have been revised downward over the past 30 days.
Stocks to Consider
Some better-ranked stocks in the basic materials space include Olympic Steel, Inc. (ZEUS - Free Report) , Commercial Metals Company (CMC - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) .
Olympic Steel currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 4.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Olympic Steel’s earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 25.4%, on average. ZEUS has rallied around 25% in the past three months.
Commercial Metals currently carries a Zacks Rank of 1. The consensus estimate for CMC's current-year earnings has been revised 13.8% upward in the past 60 days.
Commercial Metals’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 19.7%, on average. CMC has gained around 18% in the past three months.
Steel Dynamics has a projected earnings growth rate of 36.1% for the current year. The Zacks Consensus Estimate for STLD’s current-year earnings has been revised 7.3% upward in the past 60 days.
Steel Dynamics has a trailing four-quarter earnings surprise of roughly 6.2%. STLD has rallied roughly 29% in the past three months. The company currently carries a Zacks Rank #2 (Buy).