International Paper (IP) Q4 Earnings Lag Estimates, Down Y/Y

International Paper Company (NYSE:IP) IP reported fourth-quarter 2020 adjusted earnings of 75 cents per share, which missed the Zacks Consensus Estimate of 84 cents. The bottom line also declined 31% year over year from $1.09 reported in the prior year quarter due to higher input and operating costs.

Including one-time items, the company posted earnings per share of 39 cents in fourth-quarter 2020 compared with the year-ago quarter’s 42 cents.

Net sales declined 5% to $5.24 billion in the fourth quarter from the year-ago quarter. The top line also lagged the Zacks Consensus Estimate of $5.26 billion.

Adjusted cost of sales was $3,654 million, up 1% from the prior-year quarter’s $3,620 million. Gross profit declined 16% year over year to $1,585 million. Adjusted selling and administrative expenses fell 10% year over year to $396 million during the reported quarter. Adjusted operating profit was $296 million, reflecting year-over-year plunge of 31% due to higher input and operating costs.

Segment Performance

Industrial Packaging (NYSE:PKG): Sales in this segment remained flat year over year at $3.8 billion. Operating profit fell 29% year over year to $431 million.

Global Cellulose Fibers: In the reported quarter, the segment’s sales inched up 1% to $582 million from the prior-year quarter. The segment incurred an operating loss of $114 million in the quarter under review, compared with the year-ago quarter’s operating loss of $45 million.

Printing Papers: Sales of this segment amounted to $802 million, reflecting a plunge of 25% from the year-earlier quarter. The segment’s operating profit declined 27% year over year to $80 million in fourth-quarter 2020.

Financial Position

Cash and temporary investments aggregated $595 million as of Dec 31, 2020 compared with $511 million as of Dec 31, 2019. Through 2020, the company returned $800 million to shareholders and reduced debt by $1.7 billion. As of 2020-end, the company’s long-term debt was at $8.1 billion.

Cash flow from operating activities was $3 billion in 2020 compared with $3.6 billion in the prior year. Free cash flow was $2.3 billion in 2020, flat compared with the prior year.

2020 Results

International Paper’s adjusted earnings per share plunged 37% year over year to $2.80 in 2020 and missed the Zacks Consensus Estimate of $2.88. Including one-time items, the bottom line was $1.22, down 60% from the $3.07 in 2019. Sales declined 8% year over year to $20.6 billion from the prior year’s $22.4 billion. The top-line figure matched the Zacks Consensus Estimate.

Price Performance

International Paper’s shares have gained 42.3% in the past three months compared with the industry’s rally of 42.5%.

Zacks Rank & Other Stocks to Consider

International Paper currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks in the basic materials space are Fortescue Metals Group (OTC:FSUGY) Limited FSUGY, BHP Group (NYSE:BHP) BHP and Impala Platinum (OTC:IMPUY) Holdings Limited IMPUY. All of these stocks carry a Zacks Rank #1.

Fortescue has a projected earnings growth rate of 75.5% for the current fiscal. The company’s shares have surged around 41% in the past three months.

BHP has an expected earnings growth rate of 59.5% for the current fiscal. The company’s shares have gained around 34% in the past three months.

Impala has an expected earnings growth rate of 189.4% for the current fiscal. The company’s shares have rallied around 34% in the past three months.

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