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International Paper (IP) Misses Q3 Earnings on Divestures
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Paper and packaging firm International Paper Company (IP - Free Report) reported lackluster third-quarter 2016 results with adjusted operating earnings of $380 million or 91 cents per share compared with $407 million or 97 cents per share in the year-ago quarter. Operating earnings declined year over year due to lower revenues, while it also missed the Zacks Consensus Estimate of 94 cents.
GAAP earnings for the quarter were $312 million or 75 cents per share compared with $220 million or 53 cents in the year-ago quarter.
Net sales were $5,266 million versus $5,691 million in the year-ago quarter and missed the Zacks Consensus Estimate of $5,303 million. The year-over-year decline in revenues was primarily due to the sale of the IP-Sun joint venture, the Asian Corrugated Packaging business and the sale of the Carolina Coated Bristols business. Total operating profit in the reported quarter was $613 million compared with $628 million in the third-quarter 2015.
Industrial Packaging: Sales from this segment declined to $3,582 million from $3,642 million in the year-ago period. Operating profit was $424 million versus $553 million in the year-ago quarter. In North America, the negative impacts of box price erosion, increased input costs for recycled fiber and energy were only partially offset by lower planned maintenance costs.
Printing Papers: Sales from this segment were $1,266 million in the reported quarter versus $1,258 million in the year-earlier quarter as revenues from North America and Brazil benefited from lower maintenance outage costs. Operating profit for the segment was $128 million versus $179 million in the year-ago quarter.
Consumer Packaging: Sales from this segment decreased 38.9% year over year to $494 million. Operating profit was $61 million as against a loss of $153 million in the year-ago quarter due to unfavorable sales prices and mix, as well as higher costs.
Acquisition Update
During the second quarter, International Paper inked a definite agreement with leading timberland owner Weyerhaeuser Co. (WY) to acquire the latter’s pulp business for $2.2 billion in cash. With a combined capacity of nearly 1.9 million metric tons of pulp, the transaction is likely to strengthen International Paper’s position in the global fluff pulp market and augment its operating cash flow. In addition, the company expects the acquisition to generate annual synergies of approximately $175 million by the end of 2018 along with a higher flexibility to manage a wide portfolio of products to meet customer needs through superior R&D capabilities and priceless patent portfolio.
The U.S. Department of Justice has recently concluded the Hart-Scott-Rodino review of this transaction. Other regulatory reviews for the transaction in other non-U.S. jurisdictions are currently in process. The acquisition is expected to be completed in the fourth quarter.
Balance Sheet
Cash and temporary investments aggregated $2,562 million at the quarter end, while long-term debt was $10,823 million. Cash flow from operating activities was $1,566 million for the nine months of 2016 compared with $1,590 million in the prior-year period. Free cash flow at the quarter end was $575 million compared with $512 million in the prior-year period, bringing the respective tallies for the nine months to $1,413 million and $1,342 million.
With Weyerhaeuser slated to come on board in the fourth quarter, International Paper remains poised to strengthen its position in the growing global fluff pulp market for higher return on capital and higher cash return to its shareholders.
Acacia Research has a modest earnings record, beating estimates once in the four trailing quarters, with an average positive surprise of 92.86%. The company’s share price has increased by approximately 38.69% year to date.
Accenture has a modest earnings record, beating estimates thrice in the four trailing quarters, with an average positive surprise of 3.19%. The company’s share price has increased by approximately 10.48% year to date.
Exponent has a modest earnings record, beating estimates thrice in the four trailing quarters, with an average positive surprise of 9.71%. The company’s share price has increased by approximately 13.13% year to date.
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International Paper (IP) Misses Q3 Earnings on Divestures
Paper and packaging firm International Paper Company (IP - Free Report) reported lackluster third-quarter 2016 results with adjusted operating earnings of $380 million or 91 cents per share compared with $407 million or 97 cents per share in the year-ago quarter. Operating earnings declined year over year due to lower revenues, while it also missed the Zacks Consensus Estimate of 94 cents.
GAAP earnings for the quarter were $312 million or 75 cents per share compared with $220 million or 53 cents in the year-ago quarter.
Net sales were $5,266 million versus $5,691 million in the year-ago quarter and missed the Zacks Consensus Estimate of $5,303 million. The year-over-year decline in revenues was primarily due to the sale of the IP-Sun joint venture, the Asian Corrugated Packaging business and the sale of the Carolina Coated Bristols business. Total operating profit in the reported quarter was $613 million compared with $628 million in the third-quarter 2015.
Segment Performance
Industrial Packaging: Sales from this segment declined to $3,582 million from $3,642 million in the year-ago period. Operating profit was $424 million versus $553 million in the year-ago quarter. In North America, the negative impacts of box price erosion, increased input costs for recycled fiber and energy were only partially offset by lower planned maintenance costs.
Printing Papers: Sales from this segment were $1,266 million in the reported quarter versus $1,258 million in the year-earlier quarter as revenues from North America and Brazil benefited from lower maintenance outage costs. Operating profit for the segment was $128 million versus $179 million in the year-ago quarter.
Consumer Packaging: Sales from this segment decreased 38.9% year over year to $494 million. Operating profit was $61 million as against a loss of $153 million in the year-ago quarter due to unfavorable sales prices and mix, as well as higher costs.
Acquisition Update
During the second quarter, International Paper inked a definite agreement with leading timberland owner Weyerhaeuser Co. (WY) to acquire the latter’s pulp business for $2.2 billion in cash. With a combined capacity of nearly 1.9 million metric tons of pulp, the transaction is likely to strengthen International Paper’s position in the global fluff pulp market and augment its operating cash flow. In addition, the company expects the acquisition to generate annual synergies of approximately $175 million by the end of 2018 along with a higher flexibility to manage a wide portfolio of products to meet customer needs through superior R&D capabilities and priceless patent portfolio.
The U.S. Department of Justice has recently concluded the Hart-Scott-Rodino review of this transaction. Other regulatory reviews for the transaction in other non-U.S. jurisdictions are currently in process. The acquisition is expected to be completed in the fourth quarter.
Balance Sheet
Cash and temporary investments aggregated $2,562 million at the quarter end, while long-term debt was $10,823 million. Cash flow from operating activities was $1,566 million for the nine months of 2016 compared with $1,590 million in the prior-year period. Free cash flow at the quarter end was $575 million compared with $512 million in the prior-year period, bringing the respective tallies for the nine months to $1,413 million and $1,342 million.
INTL PAPER Price, Consensus and EPS Surprise
INTL PAPER Price, Consensus and EPS Surprise | INTL PAPER Quote
Moving Forward
With Weyerhaeuser slated to come on board in the fourth quarter, International Paper remains poised to strengthen its position in the growing global fluff pulp market for higher return on capital and higher cash return to its shareholders.
International Paper currently holds a Zacks Rank #2 (Buy). Some similarly ranked stocks include Accenture plc (ACN - Free Report) , Exponent Inc. (EXPO - Free Report) and Acacia Research Corporation (ACTG - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Acacia Research has a modest earnings record, beating estimates once in the four trailing quarters, with an average positive surprise of 92.86%. The company’s share price has increased by approximately 38.69% year to date.
Accenture has a modest earnings record, beating estimates thrice in the four trailing quarters, with an average positive surprise of 3.19%. The company’s share price has increased by approximately 10.48% year to date.
Exponent has a modest earnings record, beating estimates thrice in the four trailing quarters, with an average positive surprise of 9.71%. The company’s share price has increased by approximately 13.13% year to date.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>