International Paper Co. (IP) reported second quarter EPS of 80 cents, compared with earnings of 42 cents in the prior-year quarter and outperformed the Zacks Consensus Estimate of 66 cents.
After including special items of 28 cents per share, net earnings amounted to 52 cents per share versus 21 cents per share in the prior year quarter.
Net sales were $6.6 billion, versus $6.1 billion during the year-ago quarter and sales missed the Zacks Consensus Estimate of $6.7 billion.
Cost and Margins
Cost of goods sold amounted to $4,880 million, an increase from $4,490 million during the year-earlier quarter. Selling and administrative expenses also shot up to $484 million from $472 million.
Operating income totaled $483 million; having increased from $353 million in the prior-year quarter.
Segmental Performance
Industrial Packaging: Sales for this segment improved to $2,705 million from $2,440 million in the year-ago quarter. Operating income also improved substantially to $269 million from $192 million in the prior-year quarter. Seasonally higher box shipments led to the increase in segment earnings.
However it was partially offset by increased mill outage costs. Area flooding near the Vicksburg, Mississippi mill caused a 49-day shutdown resulting in approximately 80,000 tons of lost production and expenses of approximately $20 million in the quarter. Despite the lost production the company’s domestic customers experienced no supply interruptions.
Printing Papers: Sales increased to $1585 million from $1445 million in the year-earlier quarter. The segment’s reported operating income increased substantially to $243 million versus meager earnings of $47 million in the year ago quarter.
Improved mill operations and lower planned maintenance expense led to the increase in profit and was partially offset by continued increases for input and distribution fuel costs.
Consumer Packaging: Sales increased to $945 million from $845 million in the year-earlier quarter. Operating loss was $33 million in the quarter versus income of $48 million in the year ago quarter.
Xpedx (Distribution Business): Sales for the segment amounted to $1655 million, versus $1630 million in the year-ago quarter. However, operating income of this segment decreased to $4 million from $26 million in the year-earlier quarter.
Financial Position
Cash and cash equivalents of the company were $2399 million as of June 30, 2011, which declined from $2073 million as of December 31, 2010.
As of March 31, 2011, the debt-to-capitalization ratio was 50.5% compared with 55% as of December 31, 2010.
Our Take
International Paper competes with MeadWestvaco Corporation (MWV) and Weyerhaeuser Co. (WY).
Memphis, Tennessee-based International Paper Company is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia and North Africa. International Paper conducts its businesses through five segments: Printing Papers, Industrial Packaging, Consumer Packaging, Distribution (Xpedx) and Forest Products.
The stock currently holds a Zacks #4 Rank (short-term Sell recommendation).
INTL PAPER (IP): Free Stock Analysis Report
MEADWESTVACO CP (MWV): Free Stock Analysis Report
WEYERHAEUSER CO (WY): Free Stock Analysis Report
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