It has been about a month since the last earnings report for International Paper (IP). Shares have lost about 0.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is International Paper due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
International Paper Q1 Earnings & Sales Top Estimates
International Paper reported first-quarter 2020 adjusted earnings of 57 cents per share, significantly down 49% year over year. However, the bottom line outpaced the Zacks Consensus Estimate of 43 cents.
Including one-time items, the company incurred net loss per share of 36 cents during the first quarter, as against the year-ago quarter’s reported earnings per share of $1.05.
Net sales declined to $5,352 million in the first quarter from the year-ago quarter’s $5,643 million. However, the reported figure beat the Zacks Consensus Estimate of $5,227 million.
Cost of sales was $3,746 million, down from the prior-year quarter’s $3,929 million. Gross profit declined 6.3% year over year to $1,606 million. Selling and administrative expenses flared up 1.2% year over year to $418 million in the March-end quarter. Segment operating profit came in at $512 million, reflecting a year-over-year decline of 15%.
Segment Performance
Industrial Packaging: Sales in this segment fell to $3,819 million in the first quarter from the year-earlier quarter’s $3,832 million. Operating profit increased 12% year over year to $470 million.
Printing Papers: This segment’s sales were $908 million in the January-March quarter, down 15% from the prior-year quarter’s $1,065 million. Operating profit for the segment was $96 million compared with the year-ago period’s $144 million.
Global Cellulose Fibers: Sales of this segment came in at $568 million compared with the $689 million witnessed in the prior-year quarter. The segment reported an operating loss of $54 million in first-quarter 2020 against an operating profit of $35 million posted in the year-ago period.
Balance Sheet
Cash and temporary investments aggregated $1,239 million as of Mar 31, 2020 compared with $511 million as of Dec 31, 2019. As of Mar 30, 2020, long-term debt was $9.5 billion compared with $9.6 billion as of Dec 31, 2019.
Cash flow from operating activities was $649 million in the March-end quarter compared with the $733 million generated in the year-earlier period. Free cash flow was $363 million in the reported quarter compared with the prior-year quarter’s $440 million. The company is implementing prudent measures to strengthen its liquidity position to battle the coronavirus crisis.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past two months. The consensus estimate has shifted -11.43% due to these changes.
VGM Scores
At this time, International Paper has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
International Paper has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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