On Friday, Seaport Global Securities changed its stance on International Paper (NYSE:IP), upgrading the stock from Neutral to Buy and setting a price target of $52.00. The upgrade follows a 7%+ decline in International Paper's stock on Thursday after Suzano ended its pursuit of the company, which had been a factor in the stock's previous gains.
Seaport Global's decision comes as they see a more attractive entry point for the stock, citing several factors for their optimism. These include an improvement in containerboard profitability from multi-year lows, potential for 200-500 basis points of margin improvement in North American Industrial Packaging (NYSE:PKG), and the likelihood of enhanced near-term profitability in Global Cellulose Fibers. The possibility of divesting this business within the next year is also seen as a catalyst for the stock.
The firm acknowledges that International Paper is still losing market share in boxes and that its recent value over volume strategy may lead to a rocky performance in the coming quarters. Additionally, the market initially reacted negatively to International Paper's acquisition of DS Smith, due to the company's mixed history with mergers and acquisitions. However, Seaport Global believes the DS Smith deal to be strategically sound and accretive, without leading to excessive debt.
New CEO Andy Silvernail's successful track record at Idex is also seen as a positive influence, likely to attract new investors and earn patience from the market as he repositions the company. Seaport Global has also updated its 2024 estimates for International Paper and introduced projections for 2025, anticipating year-over-year improvements driven largely by higher pricing already underway.
In other recent news, International Paper, a leading global producer of fiber-based products, has been in the spotlight with several key developments. Truist Securities raised its price target on the company to $52.00 from the previous $40.00, maintaining a Buy rating. The firm's valuation is based on forward-looking earnings, EBITDA, and free cash flow estimates for 2025. Wells Fargo also increased its price target for International Paper to $41 from $37, maintaining an Equal Weight rating on the stock.
In addition, Jefferies upgraded International Paper from Hold to Buy, significantly increasing the price target to $57.00 from $38.00. The analyst noted several factors that could potentially enhance shareholder value, including a strategic shift by the company's new CEO and favorable market cycle.
However, Truist Securities expressed concerns about International Paper's future prospects following the announcement that Fibre Excellence plans to add fluff pulp capacity in France, which could pose a challenge for International Paper's Global Cellulose Fibers business.
In board news, International Paper announced the appointment of Jamie A. Beggs and Scott A. Tozier to its Board of Directors. Both appointments are expected to bring financial acumen and strategic insight to the company's Board.
InvestingPro Insights
In light of Seaport Global Securities' recent upgrade of International Paper (NYSE:IP) to Buy, current metrics from InvestingPro offer additional insights into the company’s financial health and market position. International Paper boasts a PRONEWS24 market capitalization of $15.02 billion and has maintained dividend payments for an impressive 54 consecutive years, signaling a strong commitment to shareholder returns. Despite a challenging environment reflected by an 11.6% decrease in revenue over the last twelve months as of Q1 2024, the company still achieved a gross profit of $5.104 billion, maintaining a gross profit margin of 27.57%.
InvestingPro Tips highlight that International Paper is trading at a high earnings multiple with a P/E ratio of 87.2, but it is more favorably valued on an adjusted basis with a P/E ratio of 25.77 for the same period. Analysts also predict the company will be profitable this year, which aligns with Seaport Global's positive outlook. However, it's worth noting that three analysts have revised their earnings expectations downwards for the upcoming period, suggesting potential caution. For a deeper analysis and additional insights, there are more InvestingPro Tips available, which can be accessed with an exclusive offer using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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