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International Paper at a 52-Week Low: What's Taking It Down?

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International Paper at a 52-Week Low: What's Taking It Down?

Elevated costs and adverse foreign currency translation will likely hurt International Paper's (IP) share-price performance in the near term.

International Paper Company IP spiraled down to a new 52-week low of $48.07 during the trading session on Oct 4. However, the stock recovered marginally to close at $48.78.

Over the past 52 weeks, shares of International Paper have traded between a low of $48.07 to a high of $66.94. The average volume of shares traded over the last three months is around 2.4 million.

Why the Downturn?

International Paper heavily depends on raw materials such as wood fiber, purchased in the form of pulpwood, wood chips and old corrugated containers (OCC), and certain chemicals, including caustic soda and starch, and energy sources, principally natural gas, coal and fuel oil.  Further, distribution costs are trending upward of late due to a very tight truck and rail availability as well as higher diesel fuel costs. Thus, elevated costs have hurt the company’s performance and remain a major concern for the near term.

International Paper Company Price, Consensus and EPS Surprise


International Paper Company Price, Consensus and EPS Surprise | International Paper Company Quote

The company operates in various international locations and has a significant number of manufacturing facilities in Russia, Brazil, Poland, India and Turkey. As such, the company is grappling with economic and political instabilities in a few regions across the world. Adverse foreign currency translation is also likely to dent its bottom line. Moreover, trade protection measures, like governmental subsidies and tax benefits, lend local producers a competitive advantage over International Paper.

International Paper also has a huge burden of pension obligations. Fluctuations in actual equity market returns, fluctuations in general interest rates and changes in the number of retirees are likely to increase pension costs and reduce International Paper’s cash flow, thereby limiting the positives from its acquisitions.

Price Performance

International Paper has not been performing well of late. Over the past year, the stock has declined around 16% compared with the industry’s growth of 1%.

When compared to the market at large, the stock’s performance is quite disappointing as well with the S&P 500 index gaining 15%.

Zacks Rank and Stocks to Consider

International Paper currently has a Zacks Rank #4 (Sell).

A few better-ranked stocks in the same sector include Quaker Chemical Corporation KWR, Air Products and Chemicals, Inc. APD and Cabot Corporation CBT. While Quaker Chemical sports a Zacks Rank #1 (Strong Buy), Air Products and Cabot carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Quaker Chemical has a long-term earnings growth rate of 11%. The stock has rallied 33% in a year’s time.

Air Products has a long-term earnings growth rate of 13.3%. The company’s shares have gained 11% during the past year.

Cabot has a long-term earnings growth rate of 11%. Its shares have gained 12% over the past year.

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