International Paper Q3 Earnings Top Estimates, Down Y/Y on Low Volumes

International Paper Company IP reported third-quarter 2024 adjusted earnings of 44 cents per share, which surpassed the Zacks Consensus Estimate of 24 cents by 83%. IP’s bottom line, however, plunged 31%, reflecting lower year-over-year volumes in the Industrial Packaging and Global Cellulose Fibers segments, somewhat offset by elevated prices. The decline in volume was per the company’s expectations, owing to seasonality and commercial contract restructuring. Earnings were also impacted by higher operating costs.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Including one-time items, such as combination costs related to the pending acquisition of DS Smith DITHF, strategic advisory fees and a third-party damage associated with a warehouse fire in Morocco and a gain on settlement associated with an Italian antitrust matter, the company posted earnings per share of 42 cents from continuing operations. This was lower than the earnings of 55 cents per share from continuing operations in the year-ago quarter. International Paper reported net sales of $4.69 billion, up 1.6% from the year-ago quarter as lower volumes were offset by higher prices. The top line beat the Zacks Consensus Estimate of $4.67 billion.International Paper Company Price, Consensus and EPS Surprise  International Paper Company price-consensus-eps-surprise-chart | International Paper Company QuoteInternational Paper’s Margins Contract Y/YInternational Paper reported cost of sales of $3.34 billion compared with $3.35 billion in the year-ago quarter. Selling and administrative expenses were $508 million, marking a 78% jump from the $286 million in the year-ago quarter. Total segment operating profit decreased 33% year over year to $237 million. Adjusted operating profit was $233 million, which marked a 30% slump from the third quarter of 2023. Adjusted operating margin was 5% compared with 7.2% in the year-ago quarter.Adjusted EBITDA was $500 million compared with $590 million in the year-ago quarter. Adjusted EBITDA margin was 10.7% , reflecting a 210-basis point contraction year over year.IP’s Segment Performances in Q3Industrial Packaging: The segment’s sales totaled $3.9 billion, up 3.7% from last year’s figure as a year-over-year improvement in prices offset the decline in total volume. Our estimate for the segment’s sales was $3.82 billion. Operating profit plunged 39% year over year to $197 million. Our projection for the segment’s operating profit was $131 million.The segment reported corrugating packaging volumes of 2,195 thousand short tons, down 6% from last year’s comparable quarter. We projected corrugating packaging volumes to be 2,210 thousand short tons.Containerboard volumes were 772 thousand short tons, up 14% from the year-ago quarter's figure. The figure missed our estimate of 777 thousand short tons.Recycling volumes rose 0.6% year over year to 532 thousand short tons, falling short of our projection of 537.3 thousand short tons.Volumes in Saturated Kraft were up 27.5% year over year, while Gypsum /Release Kraft volumes dipped 1.7%. EMEA Packaging reported a 3% improvement in volumes.Overall, volumes for the Industrial Packaging segment were 3,913 thousand short tons, down 0.5% from the second quarter of 2023. Our projection for the metric was 3,926 thousand short tons, which was based on 0.2% dip from the prior-year quarter.   Global Cellulose Fibers: Segmental sales dipped 2% year over year to $710 million due to lower volumes, which were somewhat offset by higher prices.  Our projection for the segment’s sales was $715 million.Operating profit was $40 million, up 48% from the year-ago quarter's figure. We had projected an operating profit of $31 million for the third quarter.The segment’s volumes were 648 thousand metric tons, which were down 6% year over year. The figure fell short of our expectation of 679 thousand metric tons, which factored in a 1.8% year-over-year decline.International Paper’s Cash & Debt PositionCash and temporary investments aggregated $1.16 billion at the end of the third quarter compared with $1.11 billion at the end of 2023. Throughout the first nine-month period of 2024, the company paid $482 million as dividends.   At the end of the reported quarter, IP’s long-term debt was $5.3 billion, lower than $5.46 billion as of 2023-end. Cash flow from operating activities was $1.28 billion in the first nine-month period of 2024 compared with $1.34 billion in the prior year period. IP generated $620 million in free cash flow in the same time period, higher than $505 million in the comparable period of 2023.International Paper’s Expectations for Q4The company expects higher earnings sequentially for the Industrial Packaging segment in the fourth quarter reflecting prior price index increases and lower costs. Even though volumes are expected to be up on seasonal trends, the same will be impacted by two fewer days in the quarter. Earnings in Global Cellulose Fibers will decline on a sequential basis due to prior price index declines, higher planned maintenance outages and accelerated depreciation of around $220 million for the Georgetown mill closure. The company stated that it will optimize cost structure, make investments to strengthen its competitive and strategic assets and reduce complexity in the business. International Paper said that it is exploring strategic options for the Global Cellulose Fibers businessUpdate on IP’s Acquisition of DS SmithInternational Paper is progressing on the acquisition process of DS Smith, announced on April 16, 2024. This should strengthen IP’s corrugated packaging business in Europe and prioritize sustainable packaging. The buyout is expected to be accretive to its 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 acquisition is expected to close by the first quarter of 2025.IP Stocks’ Price PerformanceInternational Paper’s shares have risen 45.3% in the past year compared with the industry’s 38.7% growth. Image Source: Zacks Investment Research International Paper’s Zacks RankInternational Paper currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Performance of IP’s Peer in Q3Packaging Corporation of America PKG reported adjusted earnings per share of $2.65 in the third quarter of 2024, which beat the Zacks Consensus Estimate of $2.48. The bottom line was higher than the company’s earnings guidance of $2.45 per share and grew 29% year over year. The upside was driven by higher volume in both segments and increased prices and mix in the Packaging segment, partially offset by lower prices and mix in the Paper segment.  PKG’s sales rose 12.6% year over year to $2.18 billion due to higher volumes. The top line beat the Zacks Consensus Estimate of $2.09 billion.The company currently sports a Zacks Rank of 1. Its shares have gained 49.5% in the past year.A Paper & Related Product Stock Awaiting ResultsSylvamo SLVM is scheduled to release third-quarter results on Nov. 12. The Zacks Consensus Estimate for earnings is pegged at $2.21 per share, indicating year-over-year growth of 30%. Sylvamo has a trailing four-quarter average surprise of 23.97%. The company currently carries a Zacks Rank #3 (Hold). SLVM's shares have gained 93% in the past year.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report International Paper Company (IP): Free Stock Analysis Report Packaging Corporation of America (PKG): Free Stock Analysis Report D S SMITH (DITHF): Free Stock Analysis Report Sylvamo Corporation (SLVM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks