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IP Misses Earnings Estimates

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International Paper (IP - Free Report) reported first quarter 2013 earnings of $318 million or 71 cents per share compared to $188 million or 43 cents per share in the year-earlier quarter. The increase in earnings was driven by higher selling prices to customers. The quarterly reported earnings missed the Zacks Consensus Estimate of 74 cents.

Excluding one-time items, operating earnings for the reported quarter were $292 million or 65 cents per share versus $272 million or 63 cents per share in the year-ago quarter.  .

Net sales for the reported quarter were $7,090 million versus $6,655 million in the year-ago quarter.  The increase in sales was driven by strong industrial packaging results. The quarterly sales were ahead of the Zacks Consensus Estimate of $7048 million.

Segment Performance

Industrial Packaging: Sales for this segment increased 14.3% year over year to $3.6 billion. Operating income stood at $355 million in the reported quarter versus $215 million in the year-ago quarter. The increase in this segment was driven by higher selling prices for boxes and containerboard in North America; offset partially by slow demand, higher input costs and outage expenses.

Printing Papers: Sales decreased 1.3% year over year to $1.5 billion in the quarter, while operating income increased to $149 million from $146 million in the prior-year period. The segment performance was driven by lower maintenance outage expenses in North America and improved operating costs; partially offset by slow demand, increased export mix and lower North American selling prices.

Consumer Packaging: Sales increased 2.5% year over year to $830 million, while operating profit was $7 million  compared with $103 million in the year-ago quarter. The segment performance was affected by lower maintenance expenses in North America, partially offset by higher operating costs

Xpedx (Distribution Business): Sales for the segment dropped 6.1% year over year to $1.4 billion. Segment operating loss was $5 million versus a loss of 2 million in the year-ago quarter largely due to slow demand, weaker margins and declining commercial printing and publishing volumes.

Balance Sheet

Cash and temporary investments dipped significantly to $934 million at Mar 31 2012 compared with $1,302 million as of Dec 31, 2012. Cash flow from operating activities stood at $531 million versus $581 million in the year-ago period. Long-term debt decreased to $9.5 billion from $9.7 billion at Dec31, 2012

International Paper recorded Ilim Joint Venture equity losses of $11 million versus equity earnings of $8 million in fourth quarter of 2012.


Moving ahead, International Paper expects a rise in annual maintenance outage spending and expansion project ramp-up costs at Ilim to impact the second quarter 2013 earnings. However, pricing initiatives will position the company to deliver better performance in the second half of 2013.

IP currently has a Zacks Rank #2 (Buy). Other stocks that look promising and are worth considering in the industry are PH Glatfelter Co (GLT - Free Report) , KapStone Paper and Packaging Corp. (KS - Free Report) and Resolute Forest Products Inc. , each carrying a Zacks Rank #2 (Buy).

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