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IP Q3 Earnings Beat Estimates, Sales Miss on Lower Volumes
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Key Takeaways
International Paper reports adjusted Q3 earnings of 37 cents per share, beating estimates by 23.3%.
North America operating profit rebounds to $427 million, while lower volumes and rising costs hurt results.
IP posts negative $267 million in free cash flow and lowers its 2026 North America EBITDA target.
International Paper Company (IP - Free Report) reported adjusted operating earnings of 37 cents per share for the third quarter of 2026, surpassing the Zacks Consensus Estimate of 30 cents by 23.3%. IP had reported an adjusted loss of 43 cents in the year-ago quarter.
Including one-time items, the company reported a loss from continuing operations of $2.07 per share compared with a loss of 81 cents a year ago. Results included a non-cash goodwill impairment charge of $1.38 billion related to the EMEA business. Net sales declined 0.4% year over year to $6.20 billion and missed the consensus mark of $6.35 billion by 2.4%. North American box volumes declined approximately 2% year over year on a daily basis.
International Paper continues preparing to spin off its EMEA packaging business as an independent company, DS Smith plc. The company is evaluating a potential sale alongside the planned spin-off. Under the spin-off scenario, IP intends to retain approximately 20% ownership.
International Paper Company Price, Consensus and EPS Surprise
IP's Adjusted Operating Profit Improves Year Over Year
Cost of products sold decreased 0.6% year over year to $4.26 billion. Gross profit remained nearly flat at $1.93 billion. The gross margin expanded to 31.2% from 31.1% in the year-ago quarter. Selling and administrative expenses increased 13.2% to $558 million, while distribution expenses rose 6.7% to $559 million. Adjusted operating income improved to $317 million from a loss of $240 million in the prior-year quarter, reflecting stronger underlying operating performance.
Adjusted EBITDA from continuing operations declined 1.9% year over year to $843 million. The adjusted EBITDA margin contracted to 13.6% from 13.8%.
International Paper's North America Profit Rebounds
The Packaging Solutions North America segment's sales were $3.88 billion, down 0.5% year over year but up 5.2% sequentially. Our projection for the segment’s sales was $3.93 billion.
The segment reported an operating profit of $427 million against a loss of $166 million a year ago. Adjusted EBITDA increased 1.2% to $663 million from $655 million, while the margin expanded to 17.7% from 17.5%.
Higher selling prices and improved operational performance supported results. However, lower volumes and increased recovered fiber, diesel and energy costs partly offset these benefits. The NORPAC acquisition contributed a full quarter of earnings, while Pine Hill's temporary shutdown had a $20-million negative impact on adjusted EBITDA.
Our projection for the segment’s operating income and adjusted EBITDA was $330.8 million and $570.8 million, respectively.
IP's EMEA Business Faces Persistent Demand Weakness
Packaging Solutions EMEA sales declined 1.3% year over year to $2.28 billion. Higher paper selling prices were offset by lower volumes amid continued market weakness. Our expectation for the segment’s sales was $2.38 billion.
The segment reported an operating loss of $73 million compared with a loss of $58 million a year ago. Adjusted EBITDA increased marginally to $210 million from $209 million, while the adjusted EBITDA margin improved to 9.2% from 9%.
Sequentially, adjusted EBITDA rose 15.4%, supported by cost-reduction initiatives and improved pricing. Nevertheless, weaker demand and higher input costs continued to pressure profitability.
Our projection for the segment’s operating income and adjusted EBITDA was $0.7 million and $249.7 million, respectively.
International Paper's Free Cash Flow Turns Negative
Cash provided by operating activities declined 44% year over year to $339 million in the third quarter of 2026 from $605 million in the year-ago quarter. Capital expenditures increased 33.2% to $606 million from $455 million. Consequently, free cash flow was a negative $267 million against positive $150 million in the prior-year quarter.
IP Targets Sequentially Higher North America Earnings in Q4
For the fourth quarter of 2026, International Paper expects Packaging Solutions North America adjusted EBITDA between $700 million and $740 million. Segment operating profit is projected between $460 million and $500 million.
Management expects favorable price and mix benefits of $45-$55 million and volume improvements of $25-$35 million sequentially. However, higher recovered fiber and diesel costs, along with planned maintenance outages, are expected to partly offset these gains.
International Paper Revises 2026 Targets, Advances EMEA Separation
For 2026, management now targets Packaging Solutions North America adjusted EBITDA of $2.27-$2.31 billion, down from its previous projection of $2.35-$2.45 billion. The downward revision primarily reflects weaker volumes, elevated diesel and distribution costs, and the Pine Hill disruption, partially offset by favorable pricing.
The company expects full-year free cash flow of $100-$200 million, with capital expenditures targeted between $2 billion and $2.1 billion. Maintenance outage expenses are forecast at $432 million.
Due to the planned separation of the EMEA packaging business and the U.K. regulatory requirements, IP has not included the existing Packaging Solutions EMEA financial guidance in its guidance.
IP Stock’s Price Performance
The company’s shares have lost 30.1% in the past year compared with the industry’s 12.2% decline.
Packaging Corporation of America (PKG - Free Report) reported third-quarter 2026 adjusted earnings of $3.04 per share, up 11.4% year over year and beating the Zacks Consensus Estimate of $2.95 by 3.05%. The bottom line also exceeded the company's guidance of $2.91 per share, driven by favorable price and mix in the Packaging segment and contributions from the acquired operations.
Net sales increased 12.5% year over year to $2.60 billion and beat the consensus estimate of $2.56 billion. Total corrugated products shipments rose 10.6% year over year, supported by the acquired operations.
Smurfit Westrock Plc (SW - Free Report) reported third-quarter 2026 adjusted earnings of 45 cents per share, down 22.4% year over year. The figure missed the Zacks Consensus Estimate of 60 cents. Higher freight, energy and raw material costs, along with weaker-than-expected converting volumes, pressured profitability.
Net sales increased 2% year over year to $8.16 billion but missed the consensus estimate of $8.32 billion.
A Paper & Related Product Stock Awaiting Results
Rayonier Advanced Materials (RYAM - Free Report) is scheduled to release third-quarter 2026 results on Nov. 3. The Zacks Consensus Estimate for the bottom line is pegged at earnings of 2 cents per share. The company incurred a loss of 7 cents per share in the year-ago quarter.
The consensus estimate for Rayonier Advanced Materials’ top line is pegged at $387 million, indicating 9.5% growth from the prior-year reported figure.
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IP Q3 Earnings Beat Estimates, Sales Miss on Lower Volumes
Key Takeaways
International Paper Company (IP - Free Report) reported adjusted operating earnings of 37 cents per share for the third quarter of 2026, surpassing the Zacks Consensus Estimate of 30 cents by 23.3%. IP had reported an adjusted loss of 43 cents in the year-ago quarter.
Including one-time items, the company reported a loss from continuing operations of $2.07 per share compared with a loss of 81 cents a year ago. Results included a non-cash goodwill impairment charge of $1.38 billion related to the EMEA business.
Net sales declined 0.4% year over year to $6.20 billion and missed the consensus mark of $6.35 billion by 2.4%. North American box volumes declined approximately 2% year over year on a daily basis.
International Paper continues preparing to spin off its EMEA packaging business as an independent company, DS Smith plc. The company is evaluating a potential sale alongside the planned spin-off. Under the spin-off scenario, IP intends to retain approximately 20% ownership.
International Paper Company Price, Consensus and EPS Surprise
International Paper Company price-consensus-eps-surprise-chart | International Paper Company Quote
IP's Adjusted Operating Profit Improves Year Over Year
Cost of products sold decreased 0.6% year over year to $4.26 billion. Gross profit remained nearly flat at $1.93 billion. The gross margin expanded to 31.2% from 31.1% in the year-ago quarter. Selling and administrative expenses increased 13.2% to $558 million, while distribution expenses rose 6.7% to $559 million. Adjusted operating income improved to $317 million from a loss of $240 million in the prior-year quarter, reflecting stronger underlying operating performance.
Adjusted EBITDA from continuing operations declined 1.9% year over year to $843 million. The adjusted EBITDA margin contracted to 13.6% from 13.8%.
International Paper's North America Profit Rebounds
The Packaging Solutions North America segment's sales were $3.88 billion, down 0.5% year over year but up 5.2% sequentially. Our projection for the segment’s sales was $3.93 billion.
The segment reported an operating profit of $427 million against a loss of $166 million a year ago. Adjusted EBITDA increased 1.2% to $663 million from $655 million, while the margin expanded to 17.7% from 17.5%.
Higher selling prices and improved operational performance supported results. However, lower volumes and increased recovered fiber, diesel and energy costs partly offset these benefits. The NORPAC acquisition contributed a full quarter of earnings, while Pine Hill's temporary shutdown had a $20-million negative impact on adjusted EBITDA.
Our projection for the segment’s operating income and adjusted EBITDA was $330.8 million and $570.8 million, respectively.
IP's EMEA Business Faces Persistent Demand Weakness
Packaging Solutions EMEA sales declined 1.3% year over year to $2.28 billion. Higher paper selling prices were offset by lower volumes amid continued market weakness. Our expectation for the segment’s sales was $2.38 billion.
The segment reported an operating loss of $73 million compared with a loss of $58 million a year ago. Adjusted EBITDA increased marginally to $210 million from $209 million, while the adjusted EBITDA margin improved to 9.2% from 9%.
Sequentially, adjusted EBITDA rose 15.4%, supported by cost-reduction initiatives and improved pricing. Nevertheless, weaker demand and higher input costs continued to pressure profitability.
Our projection for the segment’s operating income and adjusted EBITDA was $0.7 million and $249.7 million, respectively.
International Paper's Free Cash Flow Turns Negative
Cash provided by operating activities declined 44% year over year to $339 million in the third quarter of 2026 from $605 million in the year-ago quarter. Capital expenditures increased 33.2% to $606 million from $455 million. Consequently, free cash flow was a negative $267 million against positive $150 million in the prior-year quarter.
IP Targets Sequentially Higher North America Earnings in Q4
For the fourth quarter of 2026, International Paper expects Packaging Solutions North America adjusted EBITDA between $700 million and $740 million. Segment operating profit is projected between $460 million and $500 million.
Management expects favorable price and mix benefits of $45-$55 million and volume improvements of $25-$35 million sequentially. However, higher recovered fiber and diesel costs, along with planned maintenance outages, are expected to partly offset these gains.
International Paper Revises 2026 Targets, Advances EMEA Separation
For 2026, management now targets Packaging Solutions North America adjusted EBITDA of $2.27-$2.31 billion, down from its previous projection of $2.35-$2.45 billion. The downward revision primarily reflects weaker volumes, elevated diesel and distribution costs, and the Pine Hill disruption, partially offset by favorable pricing.
The company expects full-year free cash flow of $100-$200 million, with capital expenditures targeted between $2 billion and $2.1 billion. Maintenance outage expenses are forecast at $432 million.
Due to the planned separation of the EMEA packaging business and the U.K. regulatory requirements, IP has not included the existing Packaging Solutions EMEA financial guidance in its guidance.
IP Stock’s Price Performance
The company’s shares have lost 30.1% in the past year compared with the industry’s 12.2% decline.
Image Source: Zacks Investment Research
International Paper’s Zacks Rank
IP currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Industry Peers This Quarter
Packaging Corporation of America (PKG - Free Report) reported third-quarter 2026 adjusted earnings of $3.04 per share, up 11.4% year over year and beating the Zacks Consensus Estimate of $2.95 by 3.05%. The bottom line also exceeded the company's guidance of $2.91 per share, driven by favorable price and mix in the Packaging segment and contributions from the acquired operations.
Net sales increased 12.5% year over year to $2.60 billion and beat the consensus estimate of $2.56 billion. Total corrugated products shipments rose 10.6% year over year, supported by the acquired operations.
Smurfit Westrock Plc (SW - Free Report) reported third-quarter 2026 adjusted earnings of 45 cents per share, down 22.4% year over year. The figure missed the Zacks Consensus Estimate of 60 cents. Higher freight, energy and raw material costs, along with weaker-than-expected converting volumes, pressured profitability.
Net sales increased 2% year over year to $8.16 billion but missed the consensus estimate of $8.32 billion.
A Paper & Related Product Stock Awaiting Results
Rayonier Advanced Materials (RYAM - Free Report) is scheduled to release third-quarter 2026 results on Nov. 3. The Zacks Consensus Estimate for the bottom line is pegged at earnings of 2 cents per share. The company incurred a loss of 7 cents per share in the year-ago quarter.
The consensus estimate for Rayonier Advanced Materials’ top line is pegged at $387 million, indicating 9.5% growth from the prior-year reported figure.