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International Paper (IP) Surpasses Q4 Earnings & Revenues
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Paper and packaging firm International Paper Company (IP - Free Report) reported relatively modest fourth-quarter 2016 results with adjusted operating earnings of $303 million or 73 cents per share compared with $361 million or 87 cents per share in the year-ago quarter. Although operating earnings declined year over year due to lower revenues, it exceeded the Zacks Consensus Estimate by a couple of cents.
GAAP earnings for the quarter were $218 million or 53 cents per share compared with $178 million or 43 cents in the year-ago quarter. For full year 2016, GAAP earnings were $904 million or $2.18 per share compared with $938 million or $2.23 per share.
Net sales were $5,381 million in the reported quarter compared with $5,443 million in the year-ago quarter and exceeded the Zacks Consensus Estimate of $5,314 million. For full year 2016, the company recorded revenues of $21,079 million compared with 22,365 million in 2015. 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 $464 million compared with $483 million in the fourth-quarter 2015.
Segment Performance
Industrial Packaging: Sales from this segment declined to $3,559 million from $3,595 million in the year-ago period. Operating profit improved to $372 million from $304 million in the year-ago quarter due to improved sales price realization in North America and seasonally higher sales volumes in EMEA (Europe, Middle East & Africa).
Printing Papers: Sales from this segment were $1,055 million in the reported quarter versus $1,052 million in the year-earlier quarter. Operating profit for the segment was $121 million versus $130 million in the year-ago quarter due to higher maintenance outage costs, seasonally higher operating costs and an unfavorable product mix.
Consumer Packaging: Sales from this segment decreased to $464 million from $556 million in the prior-year quarter. Operating profit was $41 million compared with $35 million in the year-ago quarter due to unfavorable sales prices and mix, as well as higher costs.
International Paper has 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 $379 million compared with $244 million in the prior-year quarter, while operating loss was $70 million compared with operating profit of $14 million for the respective periods.
Acquisition
During the 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 its position in the global fluff pulp market and augment operating cash flow. In addition, the acquisition is likely to generate annual synergies of approximately $175 million by the end of 2018 and offer a higher flexibility to manage a wide portfolio of products through superior R&D capabilities and priceless patent portfolio.
International Paper Company Price, Consensus and EPS Surprise
Cash and temporary investments aggregated $1,033 million at year end 2016, while long-term debt was $11,075 million compared with the respective tallies of $1,050 million and $8,844 million in 2015. Cash flow from operating activities was $2,478 million for 2016 compared with $2,580 million in the prior-year period. Free cash flow for quarter end was $467 million compared with $501 million in the prior-year period, bringing the respective tallies for 2016 and 2015 to $1,880 million and $1,843 million.
Moving Forward
With Weyerhaeuser on board, 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.
P. H. Glatfelter has a modest earnings record, beating estimates twice in the trailing four quarters with an average positive surprise of 12.3%.
Svenska Cellulosa has long-term earnings growth expectations of 6% and is currently trading at a forward P/E of 18.3x.
B&G Foods has a modest earnings record, beating estimates thrice in the trailing four quarters with an average positive surprise of 12.2%. The company has long-term earnings growth expectations of 8%.
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International Paper (IP) Surpasses Q4 Earnings & Revenues
Paper and packaging firm International Paper Company (IP - Free Report) reported relatively modest fourth-quarter 2016 results with adjusted operating earnings of $303 million or 73 cents per share compared with $361 million or 87 cents per share in the year-ago quarter. Although operating earnings declined year over year due to lower revenues, it exceeded the Zacks Consensus Estimate by a couple of cents.
GAAP earnings for the quarter were $218 million or 53 cents per share compared with $178 million or 43 cents in the year-ago quarter. For full year 2016, GAAP earnings were $904 million or $2.18 per share compared with $938 million or $2.23 per share.
Net sales were $5,381 million in the reported quarter compared with $5,443 million in the year-ago quarter and exceeded the Zacks Consensus Estimate of $5,314 million. For full year 2016, the company recorded revenues of $21,079 million compared with 22,365 million in 2015. 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 $464 million compared with $483 million in the fourth-quarter 2015.
Segment Performance
Industrial Packaging: Sales from this segment declined to $3,559 million from $3,595 million in the year-ago period. Operating profit improved to $372 million from $304 million in the year-ago quarter due to improved sales price realization in North America and seasonally higher sales volumes in EMEA (Europe, Middle East & Africa).
Printing Papers: Sales from this segment were $1,055 million in the reported quarter versus $1,052 million in the year-earlier quarter. Operating profit for the segment was $121 million versus $130 million in the year-ago quarter due to higher maintenance outage costs, seasonally higher operating costs and an unfavorable product mix.
Consumer Packaging: Sales from this segment decreased to $464 million from $556 million in the prior-year quarter. Operating profit was $41 million compared with $35 million in the year-ago quarter due to unfavorable sales prices and mix, as well as higher costs.
International Paper has 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 $379 million compared with $244 million in the prior-year quarter, while operating loss was $70 million compared with operating profit of $14 million for the respective periods.
Acquisition
During the 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 its position in the global fluff pulp market and augment operating cash flow. In addition, the acquisition is likely to generate annual synergies of approximately $175 million by the end of 2018 and offer a higher flexibility to manage a wide portfolio of products through superior R&D capabilities and priceless patent portfolio.
International Paper Company Price, Consensus and EPS Surprise
International Paper Company Price, Consensus and EPS Surprise | International Paper Company Quote
Balance Sheet
Cash and temporary investments aggregated $1,033 million at year end 2016, while long-term debt was $11,075 million compared with the respective tallies of $1,050 million and $8,844 million in 2015. Cash flow from operating activities was $2,478 million for 2016 compared with $2,580 million in the prior-year period. Free cash flow for quarter end was $467 million compared with $501 million in the prior-year period, bringing the respective tallies for 2016 and 2015 to $1,880 million and $1,843 million.
Moving Forward
With Weyerhaeuser on board, 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 other favorably ranked stocks in the industry include P. H. Glatfelter Company (GLT - Free Report) , Svenska Cellulosa Aktiebolaget SCA (publ) and B&G Foods, Inc. (BGS - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
P. H. Glatfelter has a modest earnings record, beating estimates twice in the trailing four quarters with an average positive surprise of 12.3%.
Svenska Cellulosa has long-term earnings growth expectations of 6% and is currently trading at a forward P/E of 18.3x.
B&G Foods has a modest earnings record, beating estimates thrice in the trailing four quarters with an average positive surprise of 12.2%. The company has long-term earnings growth expectations of 8%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>