International Paper Earnings Benefit From Pricing Power
Strong earnings fromInternational Paper ( IP ) fueled a nice breakout for the large-cap stock Thursday.
Shares soared 6%, clearing a buy point of 49.04. Its overall technical picture remains sound as it remains in buy range.
International Paper's business is cyclical, resulting in a choppy record of quarterly earnings growth since 2009. Still, investors liked the company's Q2 report.
The company reported quarterly profit of 64 cents a share, up 21% from a year ago and 8 cents above views. Revenue growth slowed from the first quarter, rising 4% to $7.34 billion.
Sales at its industrial packaging segment rose 10% to $3.78 billion, making up nearly half of total revenue. The company was able to increase prices for corrugated packaging without seeing a slowdown in demand. Revenue at its printing papers segment inched up 2% to $1.5 billion. Consumer packaging sales rose 10% to $855 million.
Last year, International Paper completed its acquisition of corrugated packaging firm Temple-Inland for $4.5 billion.
Despite a sluggish economy, CEO John Faraci said in a statement: "As we move into the second half of the year, the company is well positioned to significantly improve earnings and free cash flow for the balance of 2013."
Analysts agree. The Thomson Reuters consensus earnings estimate for Q3 calls for profit of $1.15 a share, up 53% from a year ago. Full-year profit is expected to surge 38% this year and 33% in 2014.
The paper and packaging company, with a market capitalization of nearly $22 billion, pays a quarterly dividend of 30 cents a share, giving it an annualized yield of 2.4%.
"I view our dividend as having a lot of upside," Faraci said.