Yahoo Finance International Paper (IP) Q1 Earnings Miss on Lower Prices
International Paper Company IP reported first-quarter 2024 adjusted earnings of 17 cents per share, missing the Zacks Consensus Estimate of 23 cents by a margin of 26%. The bottom line slumped 68% year over year due to a decline in volumes in corrugated packaging, as well as lower prices in both Industrial Packaging and Global Cellulose Fibers segments.
Including one-time items, the company posted earnings per share of 16 cents from continuing operations in first-quarter 2024 compared with 49 cents in the year-ago quarter. Results were negatively impacted by approximately $52 million (pre-tax) due to the January freeze and the Ixtac, Mexico box plant fire.
Net sales were $4.6 billion in the quarter under review, down 8% from the year-ago quarter mainly due to lower prices. The top line beat the Zacks Consensus Estimate of $4.4 billion.
The cost of sales was $3.4 billion in the quarter under review, down 6% from the year-ago quarter’s $3.6 billion. Gross profit declined 13% year over year to $1.2 billion.
International Paper Company Price, Consensus and EPS Surprise
International Paper Company price-consensus-eps-surprise-chart | International Paper Company Quote
Selling and administrative expenses were $358 million, which declined 6% from $381 million in the prior-year quarter. Total segment operating profit plunged 45% year over year to $169 million in the quarter. Adjusted operating profit in the quarter was $61 million, which marked a 67% slump from $185 million in the first quarter of 2023.
Segmental Performances
Industrial Packaging: The segment’s sales were $3.8 billion, down 6.7% from last year’s reported figure due to lower prices. Operating profit plunged 33% year over year to $216 million.
The segment reported corrugating packaging volumes of 2,232 thousand short tons, down 6% from last year’s comparable quarter. We projected corrugating packaging volumes of 2,201 thousand short tons for the quarter.
Containerboard volumes in the first quarter were 739 thousand short tons, up 36% from the year-ago quarter. The figure beat our estimate of 593.9 thousand short tons.
Recycling volumes rose 2.7% year over year to 575 thousand short tons, surpassing our projection of 555.8 thousand short tons.
Volumes in Saturated Kraft were up 38% year over year, while Gypsum /Release Kraft volumes dipped 3%. EMEA Packaging reported a 1.5% improvement in volumes.
Overall, volumes for the Industrial Packaging segment were 3,991 thousand short tons, which rose 2% from the first quarter of 2023. The figure beat our projection of 3,777 thousand short tons, which was based on a 3.5% decline from last year's quarter.
Global Cellulose Fibers: The segment’s sales declined 13% year over year to $704 million in the first quarter, atrributed to lower prices. The segment reported an operating loss of $47 million in the quarter, wider than the operating loss of $16 million in the year-ago quarter.
The segment’s volumes were 729 thousand metric tons, which was up 6% year over year. The figure surpassed our expectation of 692.8 thousand metric tons, which factored in a 0.7% year-over-year improvement.
Financial Position
Cash and temporary investments aggregated $1.07 billion at the end of the first quarter of 2024 compared with $1.11 billion at the end of 2023. Throughout the quarter, the company returned $161 million as dividends.
At the end of the first quarter of 2024, IP’s long-term debt was $5.45 billion, flat with 2023 end. Cash flow from operating activities was $395 million in the first quarter of 2024 compared with $345 million in the first quarter of 2023.
Expectations for Q2
International Paper expects second-quarter volumes in the Industrial Packaging segment to be up sequentially due to seasonal factors and one additional day. Volumes in Global Cellulose Fibers are expected to be stable compared with the first quarter. Price and mix is expected to be favorable for both segments.
Announced Acquisition of DS Smith
International Paper, on Apr 16, announced that it entered an agreement to acquire the entire issued share capital of DS Smith DITHF. This marks a strategic move to strengthen its corrugated packaging business in Europe and prioritize sustainable packaging. The buyout is expected to be accretive to IP’s earnings in the first year of closure and provide at least $514 million of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following the close.
The offer values DS Smith's entire issued and to-be-issued share capital at £5.8 billion ($7.4 billion) on a fully diluted basis and DS Smith's enterprise value at £7.8 billion ($9.9 billion).
The transaction is expected to close in the fourth quarter of 2024. This is, however, subject to the approval of shareholders of both companies, as well as customary closing conditions, including regulatory clearances in Europe and the United States.
Price Performance
International Paper’s shares have dipped 0.7% in the past year against the industry’s 33.3% rise.
Image Source: Zacks Investment Research
Zacks Rank & Other Stocks to Consider
International Paper currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks from the basic materials space are Avient AVNT and Agnico Eagle Mines AEM. Both these stocks currently carry a current Zacks Rank of 2.
The Zacks Consensus Estimate for Avient’s current fiscal year's earnings is pegged at $2.55 per share, indicating year-over-year growth of 8%. AVNT beat the Zacks Consensus Estimate in three of the last four quarters, while matching it once, the average earnings surprise being 7.1%. The company’s shares have gained around 15% in the past year.
The consensus estimate of Agnico Eagle Mines’ earnings for 2024 is pegged at $2.66 per share, indicating a 19.3% year-over-year rise. AEM beat the consensus estimate in each of the last four quarters, the average earnings surprise being 13.3%. The company’s shares have gained around 13% in the past year.
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International Paper Company (IP) : Free Stock Analysis Report
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