International Paper Company (IP) is scheduled to report its fourth-quarter 2014 results before the opening bell on Jan 28. In the last reported quarter, quarterly earnings beat the Zacks Consensus Estimate by a couple of cents. Let’s see how things are shaping up for this announcement.
Factors to Consider
International Paper continues with its opportunities for reinvestment, which include the recently announced restart project at Valliant for its containerboard business; the expansion of its Canton, OH, foodservice facility; and the coated paperboard enhancement project. The company is well positioned financially and remains focused on the execution of its plans and continuous progress toward its key goals.
Over the years, International Paper has consistently returned significant cash to its shareholders through dividends and share repurchases. The company’s investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach. The free cash flow generation continues to be strong for the company.
However, the company depends heavily on raw materials such as wood fiber, purchased in the form of pulpwood, wood chips and old corrugated containers (OCC), and certain chemicals, including caustic soda and starch, and energy sources, principally natural gas, coal and fuel oil. Rising energy, chemical and OCC costs remain headwinds, particularly under harsh winter conditions.
Earnings Whispers
Our proven model does not conclusively show that International Paper will beat the Zacks Consensus Estimate in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: The Most Accurate estimate stands at 40 cents while the Zacks Consensus Estimate is higher at 60 cents. This equates to an ESP of -25.00%.
Zacks Rank: International Paper’s Zacks Rank #3, when combined with a negative ESP, makes surprise prediction difficult. Note that stocks with Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings.
We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat in the imminent future.
Arch Capital Group Ltd. (ACGL), earnings ESP of +1.92% and a Zacks Rank #1
Century Aluminum Co. (CENX), earnings ESP of +7.69% and a Zacks Rank #2.
Alnylam Pharmaceuticals, Inc. (ALNY), earnings ESP of +4.55% and a Zacks Rank #2
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
Be the first to comment