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International Paper (IP) Q2 Earnings Beat Estimates, Down Y/Y
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International Paper Company (IP - Free Report) reported second-quarter 2023 adjusted earnings of 59 cents per share, surpassing the Zacks Consensus Estimate of adjusted earnings of 42 cents per share by a margin of 40%. The bottom line declined 40% year over year, reflecting lower volumes in its segments due to the current weak demand environment and customer inventory destocking.
Including one-time items, the company posted earnings per share of 64 cents from continuing operations in second-quarter 2023, compared with earnings per share of $1.13 in the year-ago quarter.
Net sales were $4.68 billion in the quarter under review, down 13% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $4.94 billion.
International Paper Company Price, Consensus and EPS Surprise
The cost of sales was $3,360 million in the quarter under review, down 12% from the prior-year quarter’s $3,806 million. Gross profit declined 16.5% year over year to $1,322 million.
Selling and administrative expenses were $336 million, which increased 12% from $300 million in the last year’s quarter. Total segment operating profit plunged 43% year over year to $334 million in the quarter, mainly dragged down by Industrial Packaging. Adjusted operating profit in the quarter was $204 million, compared with $364 million in the second quarter of 2022.
The company realized earnings of $55 million from its Building a Better IP set of initiatives in the second quarter of 2023. This brings the total to $120 million for the first half of 2023.
Segment Performance
Industrial Packaging: The segment’s sales were $3.9 billion, down 13.5% from the last year’s reported figure. The ongoing weakness in demand for corrugated boxes and containerboard as well as lower prices impacted results. Operating profit plunged 46% year over year to $304 million. The demand environment resulted in additional economic downtime that led to higher operating costs. This offset the gains from lower planned maintenance outage costs and input costs, primarily for energy, freight and wood. 2
The segment reported corrugating packaging volumes of 2,393 thousand short tons, down 8.6% from last year. We had estimated projected corrugating packaging volumes to be around 2,318 thousand short tons for the quarter.
Containerboard volumes in the second quarter were 600 thousand short tons, which represents a year-over-year drop of 15%. The figure came in lower than our estimate of 628.1 thousand short tons.
Recycling volumes dipped 1.3% year over year to 528 thousand short tons, in line with our projection. The Industrial Packaging segment also reported year-over-year drop in volumes in Saturated Kraft (13.7%), EMEA Packaging (10.5%) and Gypsum /Release Kraft (5%) as well.
Overall, the volumes for the Industrial Packaging segment were 3,943 thousand short tons that declined 9% from the last year’s quarter. The figure came in higher that our projection of 3,897.3 thousand short tons, which was based on a 10% decline from the last year quarter.
Global Cellulose Fibers: The segment’s sales declined 11.4% year over year to $698 million in the second quarter on lower sales of fluff pulp and decreased pulp pricing. The segment reported an operating profit of $30 million in the quarter, which was a 20% improvement from the year-ago quarter due to lower operating costs, planned maintenance costs and input costs, primarily for chemicals and energy.
The segment’s volumes were reported to be 625 thousand metric tons, which was down 13% year over year. The figure came in lower than our expectation of 756 thousand metric tons, which indicated 5% year-over-year growth. Weaker-than-expected demand led to the variance.
Financial Position
Cash and temporary investments aggregated $746 million at the end of the second quarter of 2023, compared with $804 million at the end of 2022. Throughout the second quarter of 2023, the company repurchased shares worth $40 million and paid dividends worth $160 million.
At the end of the second quarter of 2023, IP’s long-term debt was around $5.6 billion, compared with $4.8 billion as of 2022-end. Cash flow from operating activities was $873 million in the first six-month period of 2023, compared with $978 million in the prior year comparable period.
Price Performance
International Paper’s shares have fallen 19.1% in the past year, compared with the industry’s 31.1% decline.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
International Paper currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are PPG Industries Inc. (PPG - Free Report) , ATI Inc. (ATI - Free Report) and Carpenter Technology Corporation (CRS - Free Report) .
The Zacks Consensus Estimate for PPG's earnings for the current fiscal year has been revised 1.6% upward in the past 60 days. It delivered an average earnings surprise of 7.3% in each of the trailing four quarters. PPG has gained around 15.5% over a year.
CRS, currently sporting a Zacks Rank of 1, has a projected earnings growth rate of 198.11% for the current year. Its earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 30.9%, on average. CRS shares have surged around 101% in a year.
ATI, currently carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 13.1% for the current year. Its earnings beat the Zacks Consensus Estimate in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 13%, on average. ATI’s shares have gained around 94% in a year.
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International Paper (IP) Q2 Earnings Beat Estimates, Down Y/Y
International Paper Company (IP - Free Report) reported second-quarter 2023 adjusted earnings of 59 cents per share, surpassing the Zacks Consensus Estimate of adjusted earnings of 42 cents per share by a margin of 40%. The bottom line declined 40% year over year, reflecting lower volumes in its segments due to the current weak demand environment and customer inventory destocking.
Including one-time items, the company posted earnings per share of 64 cents from continuing operations in second-quarter 2023, compared with earnings per share of $1.13 in the year-ago quarter.
Net sales were $4.68 billion in the quarter under review, down 13% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $4.94 billion.
International Paper Company Price, Consensus and EPS Surprise
International Paper Company price-consensus-eps-surprise-chart | International Paper Company Quote
The cost of sales was $3,360 million in the quarter under review, down 12% from the prior-year quarter’s $3,806 million. Gross profit declined 16.5% year over year to $1,322 million.
Selling and administrative expenses were $336 million, which increased 12% from $300 million in the last year’s quarter. Total segment operating profit plunged 43% year over year to $334 million in the quarter, mainly dragged down by Industrial Packaging. Adjusted operating profit in the quarter was $204 million, compared with $364 million in the second quarter of 2022.
The company realized earnings of $55 million from its Building a Better IP set of initiatives in the second quarter of 2023. This brings the total to $120 million for the first half of 2023.
Segment Performance
Industrial Packaging: The segment’s sales were $3.9 billion, down 13.5% from the last year’s reported figure. The ongoing weakness in demand for corrugated boxes and containerboard as well as lower prices impacted results. Operating profit plunged 46% year over year to $304 million. The demand environment resulted in additional economic downtime that led to higher operating costs. This offset the gains from lower planned maintenance outage costs and input costs, primarily for energy, freight and wood.
2
The segment reported corrugating packaging volumes of 2,393 thousand short tons, down 8.6% from last year. We had estimated projected corrugating packaging volumes to be around 2,318 thousand short tons for the quarter.
Containerboard volumes in the second quarter were 600 thousand short tons, which represents a year-over-year drop of 15%. The figure came in lower than our estimate of 628.1 thousand short tons.
Recycling volumes dipped 1.3% year over year to 528 thousand short tons, in line with our projection. The Industrial Packaging segment also reported year-over-year drop in volumes in Saturated Kraft (13.7%), EMEA Packaging (10.5%) and Gypsum /Release Kraft (5%) as well.
Overall, the volumes for the Industrial Packaging segment were 3,943 thousand short tons that declined 9% from the last year’s quarter. The figure came in higher that our projection of 3,897.3 thousand short tons, which was based on a 10% decline from the last year quarter.
Global Cellulose Fibers: The segment’s sales declined 11.4% year over year to $698 million in the second quarter on lower sales of fluff pulp and decreased pulp pricing. The segment reported an operating profit of $30 million in the quarter, which was a 20% improvement from the year-ago quarter due to lower operating costs, planned maintenance costs and input costs, primarily for chemicals and energy.
The segment’s volumes were reported to be 625 thousand metric tons, which was down 13% year over year. The figure came in lower than our expectation of 756 thousand metric tons, which indicated 5% year-over-year growth. Weaker-than-expected demand led to the variance.
Financial Position
Cash and temporary investments aggregated $746 million at the end of the second quarter of 2023, compared with $804 million at the end of 2022. Throughout the second quarter of 2023, the company repurchased shares worth $40 million and paid dividends worth $160 million.
At the end of the second quarter of 2023, IP’s long-term debt was around $5.6 billion, compared with $4.8 billion as of 2022-end. Cash flow from operating activities was $873 million in the first six-month period of 2023, compared with $978 million in the prior year comparable period.
Price Performance
International Paper’s shares have fallen 19.1% in the past year, compared with the industry’s 31.1% decline.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
International Paper currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are PPG Industries Inc. (PPG - Free Report) , ATI Inc. (ATI - Free Report) and Carpenter Technology Corporation (CRS - Free Report) .
PPG, which has an expected earnings growth rate of 20.8% for the current fiscal year, sports a current Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for PPG's earnings for the current fiscal year has been revised 1.6% upward in the past 60 days. It delivered an average earnings surprise of 7.3% in each of the trailing four quarters. PPG has gained around 15.5% over a year.
CRS, currently sporting a Zacks Rank of 1, has a projected earnings growth rate of 198.11% for the current year. Its earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 30.9%, on average. CRS shares have surged around 101% in a year.
ATI, currently carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 13.1% for the current year. Its earnings beat the Zacks Consensus Estimate in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 13%, on average. ATI’s shares have gained around 94% in a year.