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International Paper's (IP) Q4 Earnings: What's in Store?
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Leading packaging and paper manufacturer International Paper Company (IP - Free Report) is scheduled to report fourth-quarter 2016 results before the opening bell on Feb 2. In the last reported quarter, the company’s adjusted earnings missed the Zacks Consensus Estimate by 3 cents. In the trailing four quarters, the company beat earnings estimates thrice with an average positive earnings surprise of 6.8%.
Let’s see how things are shaping up for this announcement.
Key Factors in the Quarter
During the to-be-reported quarter, International Paper completed the acquisition of leading timberland owner Weyerhaeuser Co’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 the customers’ needs through superior R&D capabilities and priceless patent portfolio.
The company is implementing a domestic containerboard price increase on improved market demand across both the North American box business and global pulp business. Consequently, International Paper expects favorable impact of about $20 million in the fourth quarter. However, the company anticipates unfavorable impact of about $10 million relative to the North American pulp business due to the supply of softwood pulp into less than favorable market conditions.
Volume is likely to be down due to four less shipping days in the North American corrugated packaging business. This is expected to negatively impact North American packaging business results by about $50 million. In addition, disruptions with Hurricane Matthew in October are likely to unfavorably affect North American businesses to the tune of approximately $25 million.
International Paper further expects to incur a non-cash charge associated with inventory revaluation due to LIFO accounting convention related to the North American containerboard price increase. These items are expected to unfavorably impact results by $35 million.
Earnings Whispers
Our proven model does not conclusively show that International Paper is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at -3.2%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
International Paper Company Price and EPS Surprise
Zacks Rank: International Paper has a Zacks Rank #2. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +3.73% and a Zacks Rank #3. The company is slated to report fourth-quarter earnings on Feb 1.
AXIS Capital Holdings Limited (AXS - Free Report) has an Earnings ESP of +6.45% and a Zacks Rank #3. The company is set to report fourth-quarter earnings on Feb 1.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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International Paper's (IP) Q4 Earnings: What's in Store?
Leading packaging and paper manufacturer International Paper Company (IP - Free Report) is scheduled to report fourth-quarter 2016 results before the opening bell on Feb 2. In the last reported quarter, the company’s adjusted earnings missed the Zacks Consensus Estimate by 3 cents. In the trailing four quarters, the company beat earnings estimates thrice with an average positive earnings surprise of 6.8%.
Let’s see how things are shaping up for this announcement.
Key Factors in the Quarter
During the to-be-reported quarter, International Paper completed the acquisition of leading timberland owner Weyerhaeuser Co’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 the customers’ needs through superior R&D capabilities and priceless patent portfolio.
The company is implementing a domestic containerboard price increase on improved market demand across both the North American box business and global pulp business. Consequently, International Paper expects favorable impact of about $20 million in the fourth quarter. However, the company anticipates unfavorable impact of about $10 million relative to the North American pulp business due to the supply of softwood pulp into less than favorable market conditions.
Volume is likely to be down due to four less shipping days in the North American corrugated packaging business. This is expected to negatively impact North American packaging business results by about $50 million. In addition, disruptions with Hurricane Matthew in October are likely to unfavorably affect North American businesses to the tune of approximately $25 million.
International Paper further expects to incur a non-cash charge associated with inventory revaluation due to LIFO accounting convention related to the North American containerboard price increase. These items are expected to unfavorably impact results by $35 million.
Earnings Whispers
Our proven model does not conclusively show that International Paper is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at -3.2%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
International Paper Company Price and EPS Surprise
International Paper Company Price and EPS Surprise | International Paper Company Quote
Zacks Rank: International Paper has a Zacks Rank #2. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
American Financial Group, Inc. (AFG - Free Report) , which is set to report fourth-quarter earnings on Feb 1, has an Earnings ESP of +5.56% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +3.73% and a Zacks Rank #3. The company is slated to report fourth-quarter earnings on Feb 1.
AXIS Capital Holdings Limited (AXS - Free Report) has an Earnings ESP of +6.45% and a Zacks Rank #3. The company is set to report fourth-quarter earnings on Feb 1.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>