The barrage of winter storms assailing the U.S. has had a brutal impact on business at International Paper (IP). This was especially applicable to the company’s operations in the Southeast regions, as they lacked the infrastructure facilities to cope with such weather adversities. The harsh winter has cost the company $40 million to $50 million in January and early February as approximately 40,000 tons of production volumes are estimated to be lost due to lower demand and higher energy prices. Adding to the weather woes are headwinds such as a challenging macroeconomic environment, rising input costs and contracting demand across its printing segment.
International Paper, a paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia and North Africa, has been battling decreased paper demand following the growing popularity of digital communication, which has constrained revenue growth in the past few years.
In spite of reportedly weak demand and rising inventories along with sluggish domestic macroeconomic conditions, International Paper still reported record fourth-quarter earnings due to robust growth in cardboard packaging for shipping, an overlooked element of global digitization that actually benefits paper companies. The company is also exploring the inorganic route for growth, as evidenced by its acquisitions in the last year, with the most recent being its merger agreement with Unisource Worldwide Inc., a distribution solution company.
While the company is still looking for profitable and growing niches in the U.S., it has also tapped huge opportunities abroad, becoming the second biggest supplier of coated paperboard in China. International Paper's single largest investment outside the U.S. is an enormous pulp plant in Siberia, home to vast forests producing one-third of the world's soft wood, aiding in production of kitchen towels and toilet paper to cater to the budding demand from emerging countries.
Though International Paper currently holds a Zacks Rank #5 (Strong Sell), other stocks that look promising and are worth a look include Resolute Forest Products Inc. (RFP), UPM-Kymmene Oyj (UPMKY) and PH Glatfelter Co. (GLT). All these stocks carry a Zacks Rank #1 (Strong Buy).
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Read the Full Research Report on UPMKY
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- Consumer Discretionary
- International Paper