IP Misses Earnings Estimates
International Paper (IP) reported first quarter 2013 earnings of $318 million or 71 cents per share compared to $188 million or 43 cents per share in the year-earlier quarter. The increase in earnings was driven by higher selling prices to customers. The quarterly reported earnings missed the Zacks Consensus Estimate of 74 cents.
Excluding one-time items, operating earnings for the reported quarter were $292 million or 65 cents per share versus $272 million or 63 cents per share in the year-ago quarter. .
Net sales for the reported quarter were $7,090 million versus $6,655 million in the year-ago quarter. The increase in sales was driven by strong industrial packaging results. The quarterly sales were ahead of the Zacks Consensus Estimate of $7048 million.
Segment Performance
Industrial Packaging: Sales for this segment increased 14.3% year over year to $3.6 billion. Operating income stood at $355 million in the reported quarter versus $215 million in the year-ago quarter. The increase in this segment was driven by higher selling prices for boxes and containerboard in North America; offset partially by slow demand, higher input costs and outage expenses.
Printing Papers: Sales decreased 1.3% year over year to $1.5 billion in the quarter, while operating income increased to $149 million from $146 million in the prior-year period. The segment performance was driven by lower maintenance outage expenses in North America and improved operating costs; partially offset by slow demand, increased export mix and lower North American selling prices.
Consumer Packaging: Sales increased 2.5% year over year to $830 million, while operating profit was $7 million compared with $103 million in the year-ago quarter. The segment performance was affected by lower maintenance expenses in North America, partially offset by higher operating costs
Xpedx (Distribution Business): Sales for the segment dropped 6.1% year over year to $1.4 billion. Segment operating loss was $5 million versus a loss of 2 million in the year-ago quarter largely due to slow demand, weaker margins and declining commercial printing and publishing volumes.
Balance Sheet
Cash and temporary investments dipped significantly to $934 million at Mar 31 2012 compared with $1,302 million as of Dec 31, 2012. Cash flow from operating activities stood at $531 million versus $581 million in the year-ago period. Long-term debt decreased to $9.5 billion from $9.7 billion at Dec31, 2012
International Paper recorded Ilim Joint Venture equity losses of $11 million versus equity earnings of $8 million in fourth quarter of 2012.
Outlook
Moving ahead, International Paper expects a rise in annual maintenance outage spending and expansion project ramp-up costs at Ilim to impact the second quarter 2013 earnings. However, pricing initiatives will position the company to deliver better performance in the second half of 2013.
IP currently has a Zacks Rank #2 (Buy). Other stocks that look promising and are worth considering in the industry are PH Glatfelter Co (GLT), KapStone Paper and Packaging Corp. (KS) and Resolute Forest Products Inc. (RFP), each carrying a Zacks Rank #2 (Buy).
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Read the Full Research Report on GLT
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