Please ensure Javascript is enabled for purposes of website accessibility

Foolish Forecast: International Page Turner

By Rich Smith – Updated Nov 15, 2016 at 7:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Views you can use to get clues on tomorrow's news.

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.

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Kimberly-Clark Corporation Stock Quote
Kimberly-Clark Corporation
KMB
$120.29 (-0.35%) $0.42
Weyerhaeuser Co. Stock Quote
Weyerhaeuser Co.
WY
$28.99 (-1.43%) $0.42
International Paper Company Stock Quote
International Paper Company
IP
$33.10 (-2.10%) $0.71
WestRock Company Stock Quote
WestRock Company
WRK
$32.10 (-2.22%) $0.73
Neenah Paper, Inc. Stock Quote
Neenah Paper, Inc.
NP

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.