International Paper (IP) Q3 Earnings Miss Estimates on Weak Demand
International Paper Company IP reported third-quarter 2022 adjusted earnings of $1.01 per share, missing the Zacks Consensus Estimate of $1.22 by a margin of 17%. The bottom line declined 8% year over year. The company’s results bore the brunt of weak packaging demand and higher-than-expected energy and distribution costs. Lower consumer spending for goods and retail inventory destocking has impactedpackaging demand.
Including one-time items, the company posted earnings per share from continuing operations of $2.64 in third-quarter 2022 compared with $1.10 in the year-ago quarter.
Net sales were $5.4 billion in the quarter under review, up 10% from the year-ago quarter on strong price realization. The top line beat the Zacks Consensus Estimate of $5.3 billion.
International Paper Company Price, Consensus and EPS Surprise
International Paper Company price-consensus-eps-surprise-chart | International Paper Company Quote
Adjusted cost of sales was $3,824 million in the quarter under review, up 12% from the prior-year quarter’s $3,418 million. Adjusted gross profit increased 5.5% year over year to $1,578 million.
Selling and administrative expenses were $337 million, which declined 0.3% from the adjusted figure of $338 million in the last year’s quarter. Adjusted operating profit was $364 million, declining 15.5% from $431 million in the year-ago quarter.
The company realized earnings of $70 million from its Building a Better IP set of initiatives. This brings the year-to-date tally to $175 million. IP expects to exceed its target of $225 million related to the initiatives.
Segment Performance
Industrial Packaging: The segment’s sales were $4.4 billion, up 7% year on year. Operating profit declined 11% year over year to $369 million.
Global Cellulose Fibers: The segment’s sales climbed 20% year over year to $887 million in the third quarter. The segment reported an operating profit of $95 million in the quarter, a 25% improvement from the year-ago quarter’s $76 million.
Financial Position
Cash and temporary investments aggregated $511 million at the end of third-quarter 2022 compared with $1,295 million as of the end of 2021. In the third quarter, the company repurchased shares worth $269 million, and paid dividends worth $165 million.
At the end of the September-end quarter, its long-term debt was around $4.8 billion compared with $5.4 billion as of 2021-end. Cash flow from operating activities was $1.4 billion in the first nine-month period of 2022 compared with $1.9 billion in the prior-year period.
The company anticipates packaging demand to remain impacted in the fourth quarter. While input costs will come down from the elevated levels, seasonally higher operating costs will weigh on margins.
Price Performance
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International Paper’s shares have fallen 33.8% in the past year, compared with the industry’s decline of 19.3%.
Zacks Rank & Other Stocks to Consider
International Paper currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the basic materials space include Albemarle Corporation ALB, Sociedad Quimica y Minera de Chile S.A. SQM and Ryerson Holding Corporation RYI.
Albemarle, currently sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 430.7% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 5.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 22% in a year.
Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 2.1% upward in the past 60 days.
Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 81% in a year. The company currently carries a Zacks Rank #1.
Ryerson Holding, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 74.2% for the current year. The consensus estimate for RYI's earnings for the current year has been revised 3.2% upward in the past 60 days.
Ryerson Holding’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 28.9%. RYI has gained around 36% over a year.
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