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With a market cap of $20.4 billion, Memphis, Tennessee-based International Paper Company (IP) is a global leader in renewable fiber-based products. Operating in the packaging and pulp sectors, it serves diverse industries with products like corrugated packaging and cellulose fibers used in personal care and hygiene products.
Shares of the global paper and packaging company have significantly outperformed the broader market over the past 52 weeks. IP has jumped 71.3% over this time frame, while the broader S&P 500 Index ($SPX) has gained 35.8%. In 2024, IP stock rallied 62.7%, compared to SPX's 24.3% YTD gain.
Narrowing the focus, International Paper Company stock has also outpaced the Materials Select Sector SPDR Fund's (XLB) 21.1% rise over the past 52 weeks and 11% increase on a YTD basis.
International Paper Company has been improving efficiency and profitability by divesting lower-margin divisions, such as its cellulose operation, which could generate substantial proceeds. Its focus on commercial execution and leveraging a recovering demand environment has also strengthened investor confidence.
Moreover, the stock surged 13.3% on Oct. 31 after reporting Q3 adjusted earnings of $0.44 per share, significantly beating the consensus estimate, despite a 31% year-over-year earnings decline due to lower volumes and higher costs. Revenue rose 1.6% year-over-year to $4.69 billion, exceeding estimates, as price increases in Industrial Packaging offset volume declines from expected seasonality and contract restructuring. Investor optimism also rose with IP’s pending DS Smith acquisition, expected to strengthen its European packaging business and deliver at least $514 million in annual pre-tax synergies.
For the current fiscal year ending in December, analysts expect IP's EPS to decline 33.3% year-over-year to $1.44 per share. The company's earnings surprise history is mixed. It topped the consensus estimates in three of the last four quarters while missing on another occasion.
Among the nine analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on five “Strong Buy” ratings, one “Moderate Buy,” and three “Holds.”
This configuration is slightly more bullish than three months ago, with four “Strong Buy“ ratings on the stock.
On Nov. 2, RBC Capital's analyst Matthew McKellar raised International Paper's price target to $64 and maintained an “Outperform“ rating due to strong progress in strategic initiatives and anticipated resilience amid near-term volume fluctuations, with long-term gains expected from market recovery and business transformation.
As of writing, IP is trading above the mean price target of $54.99. The Street-high price target of $66, implies a potential upside of 12.2% from the current price levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
