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Memphis, Tennessee-based International Paper Company (IP) is a leading producer of fiber-based packaging, pulp, and paper products. Valued at a market cap of $24.5 billion, the company offers industrial packaging solutions, including containerboard, corrugated packaging, and specialty papers, as well as pulp for hygiene and personal care items, along with recycled and specialty fiber products.
Companies worth $10 billion or more are typically classified as “large-cap stocks,” and IP fits the label perfectly, with its market cap exceeding this threshold, underscoring its size, influence, and dominance within the packaging & containers industry. The company has established a strong reputation for innovation and sustainability, both in sourcing renewable materials and in its operational practices, which closely align with the growing demand from customers and regulators for eco-friendly products.
This packaging company has slipped 23.1% from its 52-week high of $60.36, reached on Nov. 25, 2024. Shares of IP have gained marginally over the past three months, considerably underperforming the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 14.7% return during the same time frame.
In the longer term, IP has declined 7.1% over the past 52 weeks, significantly lagging behind XLY's 22.5% uptick over the same time period. Moreover, on a YTD basis, shares of IP are down 13.7%, compared to XLY’s 7.6% rise.
To confirm its bearish trend, IP has been trading below its 200-day moving average since early April, with slight fluctuations, and has remained below its 50-day moving average since late July, with minor fluctuations.
Shares of IP crashed 12.9% on Jul. 31, after its Q2 earnings release. While the company’s revenue surged 42.9% year-over-year to $6.8 billion and met the consensus estimates, its adjusted operating EPS of $0.20 fell short of analyst expectations by a notable margin of 47.4%. A significant drop in margins, due to continued cost headwinds, weaker demand in Europe, and a noteworthy increase in depreciation and amortization expenses, impacted its bottom line, leading to a sharp 63.6% annual decline in its adjusted operating earnings per share. Moreover, its free cash flow contracted 67.7% year-over-year to $54 million, adding to investor concerns and fueling the stock’s sharp selloff.
IP has also lagged behind its rival, Packaging Corporation of America (PKG), which declined 2% over the past 52 weeks and 6.2% on a YTD basis.
Despite IP’s recent underperformance, analysts remain moderately optimistic about its prospects. The stock has a consensus rating of "Moderate Buy” from the 13 analysts covering it, and the mean price target of $55.70 suggests a 20% premium to its current price levels.
