NEW YORK—International Paper Co. reports earnings for the first quarter on Wednesday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Memphis, Tenn.-based International Paper is exposed to many facets of the U.S. economy with its diverse business segments. The company makes writing and printing paper, packaging products and building materials.
Poor demand for newsprint has pressured paper producers, as more consumers turn to the Internet for their information. However, prices have improved on consolidation and curtailed capacity.
Also, a sagging housing market is crimping prices for lumber and oriented strand board, which is often used in residential construction. Meanwhile, a strong Canadian dollar is hurting paper and forest product companies located in Canada.
IP in March announced its purchase of Weyerhaeuser Co.'s containerboard segment for $6 billion in cash, which is part of IP's plan to focus more on producing uncoated paper and containerboard. It makes IP the largest containerboard producer in North America.
However, the high-priced purchase puzzled some analysts, who wondered why IP would buy containerboard, which has been showing signs of weakness. Containerboard is used to make corrugated boxes.
BY THE NUMBERS: Analysts polled by Thomson Financial expect 50 cents per share and sales of $5.65 billion.
ANALYST TAKE: CIBC World Markets analyst Don Roberts expects results to decline from a year ago because of weakness in the company's forest segment, which includes land sales and real estate development.
On the positive side, higher pulp and uncoated freesheet paper prices should ease this somewhat, he said. Uncoated freesheet paper, or UFS, is used as office and business printing paper, in addition to envelopes.
Overall, Roberts said IP is one of few companies expected to generate positive earnings in the first quarter. The company is one of his top picks.
Roberts expects 57 cents per share in the quarter. His previous estimate was 59 cents per share.
WHAT'S AHEAD: IP is scheduled to hold a shareholders meeting on May 12.
STOCK PERFORMANCE: During the quarter, shares declined 16 percent. So far this year, the stock has declined 13 percent.
