International Paper (IP) is a Zacks Rank #1 (Strong Buy) that has a C for Value and a D for Growth. The company is a global producer of renewable fiber-based products. Some of those products include packaging goods and other paper related items. Let’s explore more about why this stock is the Bull of the Day.
Description
International Paper Co. engages in the business of producing renewable fiber-based packaging and pulp products with manufacturing operations. It operates through the following segments: Industrial Packaging, Global Cellulose Fibers, and Corporate and Intersegment. The Industrial Packaging segment is involved in creating fiber-based packaging that protects and promotes goods, enables worldwide commerce, and helps keep consumers safe. The Global Cellulose Fibers segment offers a wide range of applications like diapers, towel and tissue products, feminine care, incontinence, and other personal care products that promote health and wellness. The company was founded by Hugh J. Chisholm in 1898 and is headquartered in Memphis, TN.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
International Paper (IP) has a good earnings history with the company topping the Zacks Consensus Estimate in 3 of the last 4 quarters.
The most recent earnings print saw the company posted a gain of 44 cents when the consensus was at 24 cents. That 20 cent beat translates into a positive earnings surprise of 83%
Over the last four quarters the average earnings surprise works out to be 28%.
Earnings Estimates Revisions
Earnings estimate revisions is what the Zacks Rank is all about.
Estimates are moving higher for International Paper (IP).
Following the recent beat, the estimates for this quarter has held still at $0.06.
Next quarter has moved from $0.42 up to $0.44
The full year 2024 estimate is down from $1.42 to $1.18.
Next year increased from $2.92 to $3.02
All of the estimate moves have come in the last 60 days.
Growth
I see revenue in 2024 will come in around $18.7B which will end up being a contraction of just under 1%.
2025 is calling for sales of $19.6B which represents 4.7% growth.
Valuation
The forward PE stands at 18.3x which is a little high given the lack of growth in 2024. The price to book multiple of 2.2x is low enough to keep the value oriented investors interested in this stock. Price to sales comes in just a hair over 1x, which is to be expected as this is more of a commodity based product.
Margins are rather thin, as one would expect for a product like this. There basically isn’t a moat for IP, and we have seen operating margins fall from 3.3% to 2.9% over the last two quarters.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
