International Paper Co. (NYSE: IP – $53.97) delivered decent first quarter results in the face of several challenges, including the digester incident at the company’s Pensacola mill and higher input costs driven by a significant rise in recycled corrugated container prices. The company reported adjusted first quarter earnings equal to $0.60 per share compared to $0.80 last year, but four cents ahead of consensus. Quarterly net sales were $5.5 billion vs. $5.1 billion in the first quarter of 2016 and higher by most estimates by $100 million. The year-over-year revenue increase was primarily due to the pulp business that was acquired from Weyerhaeuser in late 2016.
Favorable end-market conditions, when combined with cost cutting measures, suggest healthier-operating conditions as we move further into 2017. The likelihood of an improving economic climate stateside should assist IP’s integration of the pulp business, helping to drive anticipated synergies. Memphis-based International Paper’s biggest segment by sales, Industrial Packaging, appears positioned to deliver higher earnings, powered by a previously announced price increase and growing demand from customers. On balance, I am looking for share profit of $3.75 – $3.90 on sales of $22 billion in 2017. For patient investors, these shares have wide total return potential out to 2020-2022 and yield a handsome 3.4%.