OK, so paper isn't quite as exciting as stem cells and nanotech. But when investing, you take your profits where you find them. Are there any hidden between the creases at International Paper (NYSE:IP)? Tomorrow the company opens its books on Q4 and full-year 2005. It could be a page-turner.

Now that I've gotten the mandatory cliches out of the way, let's take a look at what International Paper might have in store for us.

Wall Street Wisdom:

  • General consensus. Fifteen analysts consider International Paper required reading (sorry, I'm done now). Six call the stock a "buy," seven a "hold," and only two say "sell."
  • Revenues. Revenues are believed to have declined 11% year over year in the fourth quarter, to $5.88 billion.
  • Earnings. Profits are expected to decline even more steeply, from $0.42 last year to $0.08 in Q4 2005.

Margin watch:
Now that you know what the professionals think, let's take a look at how the company has actually been performing.

Margins%

6/04

9/04

12/04

3/05

6/05

9/05

Gross

25.3

25.7

25.6

25.7

25.5

25.1

Op.

5.7

6.2

6.6

6.9

6.8

6.4

Net

1.9

(0.7)

(0.1)

(0.1)

(0.6)

5.1

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish forensics:
As you can see from the above, International Paper's gross margin hasn't really deteriorated all that much in recent quarters. The past year has seen some sliding in the gross and operating margins, but nothing worth worrying about. Mainly, it's the net margin line that's taking the hits -- feeling the effects of a string of restructuring charges and losses on sales of assets. Those continued in the most recent quarter, but the net was saved by a large insurance settlement. Don't expect that to be repeated tomorrow (on the contrary, look for a $0.02 charge for an antitrust settlement), but do look for signs that the restructuring has produced a leaner and meaner International Paper, one that can execute more efficiently in the coming quarters.

Competitors:
International Paper competes against Kimberly-Clark (NYSE:KMB) spinoff and Motley Fool Hidden Gems recommendation Neenah Paper (NYSE:NP), MeadWestvaco (NYSE:MWV), and Weyerhaeuser (NYSE:WY), among others.

Fool contributor Rich Smith does not own shares of any company named above.