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A Look at International Paper and Its Latest Acquisition

Gabriel Kane

Who Were Last Week's Key Consumer Sector Players?

(Continued from Prior Part)

Price movements of International Paper

International Paper Company (IP) rose by 2.6% to close at $40.94 per share at the end of the third week of March 2016. The stock’s price movements on a weekly, monthly, and year-to-date (or YTD) basis are 2.6%, 15.9%, and 10.0%, respectively.

Currently, IP is trading 9.3% above its 20-day moving average, 14.6% above its 50-day moving average, and 0.17% above its 200-day moving average.

The Guggenheim Timber ETF (CUT) invests 4.0% of its holdings in International Paper. The ETF tracks the Beacon Global Timber Index, an index that uses a multifactor selection process to identify global timber stocks with the greatest risk-to-reward potential. The YTD price movement of CUT was -3.9% as of March 17, 2016.

The competitors of International Paper (IP) and their market capitalizations are:

  • Packaging Corporation of America (PKG) — $5.4 billion
  • Domtar (UFS) — $2.4 billion
  • KapStone Paper and Packaging (KS) — $1.2 billion

New investment and divestiture

As per the company’s filing, “International Paper has entered into a definitive agreement to sell its corrugated packaging business in China and Southeast Asia to Xiamen Bridge Hexing Equity Investment Partnership Enterprise. It will receive ~RMB 1 billion (~$150 million at current exchange rate), subject to post-closing adjustments and other payments, including the buyer’s assumption of the liability for loans of ~$50 million to be paid to the company within 6 months of the closing of the sale.”

The filing continued, “The company has entered into a binding agreement with Holmen Paper to purchase Holmen’s newsprint mill in Madrid, Spain, and intends to convert the facility to produce recycled containerboard with the capacity of 380,000 metric tonnes. It will invest a total of 150 million euro in the purchase price and conversion costs. It would purchase the Madrid newsprint Mill, associated recycling operations and a 50% ownership interest in a cogeneration facility.”

Performance of International Paper in 4Q15 and 2015

International Paper reported 4Q15 net sales of $5,443.0 million, a fall of 8.4% compared to net sales of $5,943.0 million in 4Q14. Sales of its industrial packaging, printing papers, and consumer packaging segments fell by 2.8%, 10.0%, and 35.0%, respectively, in 4Q15, compared to 4Q14.

Its net income and EPS (earnings per share) rose to $178.0 million and $0.43, respectively, in 4Q15, compared to $134.0 million and $0.32, respectively, in 4Q14.

2015 results

In 2015, IP reported net sales of $22,000 million, a fall of 5.3% YoY (year-over-year). Its net income and EPS rose to $938.0 million and $2.23, respectively, in 2015, compared to $555.0 million and $1.29, respectively, in 2014.

Meanwhile, its cash and temporary investments and inventories fell by 44.2% and 8.1%, respectively, in 2015. Its current ratio and long-term debt-to-equity ratio rose to 1.65x and 2.3x, respectively, in 2015, compared to 1.62x and 1.6x, respectively, in 2014.

The price-to-earnings and price-to-book value ratios of International Paper are 18.4x and 4.3x, respectively, as of March 18, 2016.

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