International Paper (IP) Q1 Earnings Beat On Higher Revenues

Paper and packaging firm, International Paper Company (NYSE:IP) , 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.

Moving Forward

International Paper expects solid traction in the future with price increases, acquisition synergies and significantly lower outage expenses, thereby remaining confident of continuing its earnings growth momentum in coming quarters.

International Paper currently holds a Zacks Rank #2 (Buy). Other stocks in the industry worth considering include KapStone Paper and Packaging Corporation (NYSE:KS) , WestRock Company (NYSE:WRK) and DS Smith Plc DITHF. While KapStone and WestRock sport a Zacks Rank #1 (Strong Buy), DS Smith carries Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

KapStone has a long-term earnings growth expectation of 14%. It has a positive earnings surprise history with an average of 12.9% in the trailing four quarters, beating estimates twice.

WestRock has a long-term earnings growth expectation of 12.8%. It has surpassed earnings estimates in each of the trailing four quarters, with an average of 13.5%.

DS Smith has a long-term earnings growth expectation of 8%.

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