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International Paper's (IP) Earnings Trump Estimates in Q2

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International Paper Company (IP - Free Report) reported second-quarter 2020 adjusted earnings of 77 cents per share, significantly down 33% year over year. However, the bottom-line figure outpaced the Zacks Consensus Estimate of 38 cents.

Including one-time items, the company recorded earnings per share of 67 cents during the June-end quarter compared with the year-ago quarter’s 73 cents.

Net sales declined to $4,866 million in the second quarter from the year-ago quarter’s $5,667 million. The reported figure also missed the Zacks Consensus Estimate of $5,124 million.

Adjusted cost of sales was $3,385 million, down from the prior-year quarter’s $3,890 million. Adjusted gross profit slid 17% year over year to $1,481 million. Selling and administrative expenses dropped 17.4% year over year to $332 million during the June-end quarter. Segment operating profit came in at $428 million, reflecting a year-over-year plunge of 32%.

International Paper Company Price, Consensus and EPS Surprise

International Paper Company Price, Consensus and EPS Surprise

Segment Performance

Industrial Packaging: Sales in this segment fell to $3,633 million in the second quarter from the year-earlier quarter’s $3,864 million. Operating profit decreased 12.8% year over year to $449 million.

Printing Papers: This segment’s sales came in at $583 million in the April-June quarter, down 46.4% from the prior-year quarter. The segment incurred an operating loss of $11 million, as against the year-ago quarter’s operating profit of $114 million.

Global Cellulose Fibers: Sales of this segment came in at $605 million compared with the $661 million witnessed in the year-earlier quarter. The segment posted an operating loss of $10 million in second-quarter 2020.

Balance Sheet

Cash and temporary investments aggregated $847 million as of Jun 30, 2020 compared with $511 million as of Dec 31, 2019. As of Jun 30, 2020, long-term debt was $9.4 billion compared with $9.6 billion as of Dec 31, 2019.

Cash flow from operating activities was $1,539 million in the first half of the current year compared with the $1,800 million generated in the first half of 2019. Free cash flow was $638 million in the reported quarter compared with the prior-year quarter’s $732 million.

The company will continue to focus on cash generation to strengthen its liquidity position in a bid to battle the coronavirus crisis.

Price Performance

International Paper’s shares have gained 8.4% over the past three months, outperforming the industry’s growth of 7.4%.

Zacks Rank & Other Stocks to Consider

International Paper currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space include Equinox Gold Corp. (EQX - Free Report) , Harmony Gold Mining Company Limited (HMY - Free Report) and Northern Dynasty Minerals Ltd. (NAK - Free Report) , each carrying a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Equinox Gold has an expected earnings growth rate of 65.5% for 2020. The company’s shares have surged 96.8% in the past year.

Harmony Gold has an estimated earnings growth rate of 264.3% for fiscal 2020. Its shares have soared 154.4% in a year’s time.

Northern Dynasty has a projected earnings growth rate of 28.6% for the current year. The company’s shares have skyrocketed 285.5% over the past year.

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