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International Paper (IP) Q3 Earnings Top, Sales Lag Estimates

Zacks Equity Research

International Paper Company IP reported third-quarter 2019 adjusted earnings of $1.09 per share, down 30% year over year. However, the bottom-line figure outpaced the Zacks Consensus Estimate of $1.00.

Including one-time items, earnings during the July-September quarter came in at 87 cents compared with the year-ago quarter’s $1.37.

Net sales declined to $5,568 million in the reported quarter from $5,901 million in the year-ago quarter. Further, the reported figure missed the Zacks Consensus Estimate of $5,730 million.

International Paper Company Price, Consensus and EPS Surprise
 

International Paper Company Price, Consensus and EPS Surprise

International Paper Company price-consensus-eps-surprise-chart | International Paper Company Quote

Cost of sales was $3,772 million, down from the $3,887 million recorded in the prior-year quarter. Gross profit declined 11% year over year to $1,796 million. Selling and administrative expenses went down 4% year over year to $387 million in the quarter. Adjusted operating earnings came in at $431 million, reflecting a year-over-year decline of 33%.

Segment Performance

Industrial Packaging: Sales in this segment slipped to $3,820 million in the reported quarter from $4,034 million in the year-earlier period. Adjusted operating profit declined 10.5% year over year to $535 million.

Printing Papers: This segment’s sales were $1,071 million in the third quarter, down 2.8% from $1,102 million in the year-earlier quarter. Adjusted operating profit for the segment was $162 million compared with $188 million in the year-ago period.

Global Cellulose Fibers: Sales of this segment came in at $624 million compared with $714 million in the prior-year quarter. The segment reported adjusted operating profit of $4 million in third-quarter 2019 compared with $85 million in the year-ago period.

Balance Sheet

Cash and temporary investments aggregated $697 million at the end of the third quarter of 2019 compared with $589 million at the end of the 2018. As of the third quarter’s end, long-term debt was $9.96 billion compared with $10.02 billion as of Dec 31, 2018.

Cash flow from operating activities was $2.7 billion in the nine-month period ended Sep 30, 2019 compared with $2.4 billion generated in the prior-year comparable period. Free cash flow was $1,769 million during the nine-month period ended Sep 30, 2019 compared with $1,119 million in the comparable period last year.

International Paper repurchased shares worth $74 million during the third quarter, bringing the trailing 12-month total to $685 million. The company has paid dividend worth $595 million so far this year.

Price Performance
 


International Paper’s shares have lost 5.9% over the past year compared with the industry’s decline of 50.6%.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the Basic Materials space are Agnico Eagle Mines Limited AEM, Franco-Nevada Corporation FNV and Kirkland Lake Gold Ltd. KL, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines has an expected earnings growth rate of 168.57% for 2019. The company’s shares have gained 69% in the past year.

Franco-Nevada Corporation has a projected earnings growth rate of 39.32% for the current year. The company’s shares have rallied 52% in a year’s time.

Kirkland Lake Gold has an estimated earnings growth rate of 93.38% for the ongoing year. Its shares have appreciated 131% in the past year.

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