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Why Is International Paper (IP) Up 4.2% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for International Paper Company (IP - Free Report) . Shares have added about 4.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is IP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

International Paper Q1 Earnings Beat on Higher Revenues

Paper and packaging firm, International Paper reported solid first-quarter 2018 financial results, with adjusted operating earnings of $395 million or 94 cents per share compared with $232 million or 56 cents per share in the year-ago quarter, largely driven by top-line growth. Operating earnings also exceeded the Zacks Consensus Estimate by 5 cents.

GAAP earnings for the quarter were $729 million or $1.74 per share compared with $209 million or 50 cents per share in the year-ago quarter.

Net sales improved to $5,621 million in the reported quarter from $5,132 million in the year-ago quarter, comfortably surpassing the Zacks Consensus Estimate of $5,430 million.

Total business segment operating profit in the reported quarter was $512 million compared with $414 million in first-quarter 2017. The significant year-over-year increase in operating profit was largely attributable to higher revenues.

Segment Performance

Industrial Packaging: Sales from this segment increased to $3,827 million from $3,577 million in the year-ago period. Operating profit improved to $437 million from $384 million in the year-ago quarter. The improved performance was mostly driven by record box shipments, higher average sales prices and volumes in North America.

Printing Papers: Sales from this segment were $1,053 million in the reported quarter compared with $995 million in the year-earlier quarter. Operating profit for the segment was $64 million compared with $100 million in the year-ago quarter, due to higher planned maintenance outage costs, higher input costs and lower sales volumes.

Global Cellulose Fibers: Sales from this segment were $677 million compared with $564 million in the prior-year quarter due to higher fluff pulp sales volume as global demand remained strong. Operating profit was $11 million against operating loss of $70 million a year ago, largely driven by higher average sales prices, record volume and strong synergy realization.

Discontinued Operations

Discontinued operations of the North American Consumer Packaging business resulted in an income of $368 million or 88 cents per share in the first quarter compared with income of $17 million or 4 cents per share in the year-ago quarter.

Balance Sheet

As of Mar 31, 2018, cash and temporary investments aggregated $1,141 million compared with $998 million in the year-ago period while long-term debt was $10,759 million at quarter end.

Cash flow from operating activities for the first quarter was $663 million compared with $633 million in the prior-year period. Free cash flow for the quarter was $174 million compared with $259 million in the prior-year period.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

VGM Scores

At this time, IP has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. The stock was also allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

IP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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