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What's in Store for International Paper (IP) in Q1 Earnings?

Zacks Equity Research

International Paper Company IP is scheduled to report first-quarter 2019 results, before the opening bell on Apr 25.

In fourth-quarter 2018, the company delivered adjusted earnings per share of $1.65, up 30% year over year. Total revenues increased 4.2% year over year to $5,951 million in the quarter. The company beat the Zacks Consensus Estimate for both the counts.

In fact, the company surpassed the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 5.85%. Let’s see how things are shaping up prior to this announcement.

International Paper Company Price and EPS Surprise

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

Earnings Whispers

Our proven model shows that International Paper is likely to beat estimates in the first quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:

Earnings ESP: Earnings ESP for International Paper is +0.55%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: International Paper currently carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

It should be noted that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Consider

In the Industrial Packaging business, box demand remains strong aided by e-commerce. This momentum will likely continue throughout this year. Further, the company’s focus to serve the rapidly-growing segments will be significantly conducive to its first-quarter performance. Its concerted efforts to align with customers will also aid results.
The Zacks Consensus Estimate for the Industrial Packaging segment is currently pegged at $3,904 million, reflecting a 2% rise year over year. The segment’s operating profit for the quarter is projected to decline 11% year over year to $389 million.

The Printing Papers segment revenues are expected to be up 4% year over year to $1,097 million in the to-be-reported quarter. The segment’ operating profit is estimated at $134 million for the Jan-Mar quarter — marking a considerable increase of 109% from the $64 million reported a year ago. Improved global demand is likely to drive this segment’s revenues.

At the Global Cellulose Fibers business, global pulp demand remains strong and demand in the fluff segment continues to grow at a rate of 4-5%, annually. Product introductions in the fluff pulp segment and the company’s optimization initiatives are anticipated to be conducive to the quarter’s results. The Zacks Consensus Estimate for the segment’s revenues is pinned at $700 million, calling for year-over-year growth of 3.4%. The segment’s operating profit is pegged at $8 million.
Notably, the Zacks Consensus Estimate for total sales of $5,743 million for the quarter to be reported indicates a year-over-year increase of 2.2%.
Nevertheless, International Paper’s segments will be affected by price and volume pressure during the Mar-end quarter. Further, maintenance outages will be sequentially higher in the quarter. The company is also plagued with rising input costs and distribution costs which are likely to drag down margins. These apart, the company is also set to incur elevated operational costs in the Printing Papers segment, primarily stemming from unfavorable foreign currency translation.

The Zacks Consensus Estimate of 91 cents for International Paper’s earnings remained unchanged, over the past 30 days, underlining a year-over-year drop of 3.2%.

Shares of International Paper have lost 17% in the past year compared with the industry’s decline of 34%.

Stocks to Consider

Here are a few other companies that you may want to consider, as our model shows these too have the right combination of elements to post an earnings beat this quarter:

Valmont Industries, Inc. VMI has an Earnings ESP of +11.60% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axon Enterprise, Inc. AAXN has an Earnings ESP of +6.99% and carries a Zacks Rank #3.

Dover Corporation DOV has an Earnings ESP of +0.25% and presently carries a Zacks Rank #3.

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