International Paper Company (IP - Free Report) looks promising at the moment, backed by its focus on acquisitions and restructuring initiatives. We believe that this is the right time to add the stock to your portfolio, as it is poised to carry the bullish momentum ahead.
Let's delve deeper and analyze the factors that make this paper and packaging company an attractive investment option.
What's Working in Favor of International Paper?
Solid Rank & VGM Score: International Paper currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company also flaunts a Value Growth Momentum Score (VGM Score) of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or #2, offer the best investment opportunities. Thus, the company appears to be a potential investment option at the moment.
Faring better than the Industry: Over the past three months, International Paper has outperformed the industry it belongs to. The company’s shares have gained 0.4% compared with 2.6% decline recorded by the industry.
Upward Estimate Revisions: In the past 30 days, the company’s Zacks Consensus Estimate for earnings per share for 2018 has increased 0.6% to $5.11. The same for 2019 has gone up 1.1% to $5.60 during the same period.
Positive Earnings Surprise History: International Paper has an impressive earnings surprise history. It outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive earnings surprise of 4.44%.
Strong Q1 Results: International Paper’s first-quarter 2018 earnings and revenues increased on a year-over-year basis and beat the respective Zacks Consensus Estimate.
Other Growth Drivers: International Paper is undergoing restructuring, under which it has offloaded businesses in China to focus more on its U.S. operations. The company has also completed the divestiture of its consumer packaging business in North America to Graphic Packaging Holding Company (GPK - Free Report) in January 2018. Further, International Paper intends to invest significantly to improve its North American container-board mill system, enhance product quality, and reduce manufacturing and delivery costs.
Notably, International Paper acquired Weyerhaeuser Company’s (WY - Free Report) pulp business in 2016 for $2.2 billion in cash. The acquisition is expected to generate annual synergies of approximately $175 million by the end of 2018 along with a higher flexibility to manage a wide portfolio of products to meet customer needs through superior R&D capabilities and priceless patent portfolio.
Moreover, International Paper aims to utilize its sound cash flow by investing in capital projects, reducing total debt, and returning a greater proportion of cash to shareholders through increased dividend payouts and share repurchases. The company intends to focus more on high-return capital projects within its core businesses that can drive additional earnings growth.
International Paper has a long-term earnings growth rate of 9.5%.
Other Stock to Consider
Another top-ranked stock in the same sector is Methanex Corporation (MEOH - Free Report) , which flaunts a Zacks Rank of 1. Methanex has a long-term earnings growth rate of 15%. Its shares have improved 13% over the past three months.
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