Opinions
Bruce Murray
International Paper
IP-N
DON'T BUY
Sep 18, 2018
Stock price when the opinion was issued
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We are in a process of reflating the system and materials are behaving quite well. Breadth is expanding and momentum is improving. He owns another. This one does look good and pricing is firm. They should continue to do well. He really likes the timber companies, though.
You have the declining paper sales. People are using iPads, and don’t need paper. On the other hand, they make packaging, and sales are going up because of Amazon (AMZN-Q) and e-commerce. Looking at earnings and free cash flow, it looks like their growth from packaging is beating out the loss of revenues from paper. You also get a nice dividend of 3.3%.
Over the past 10-15 years, they've re-focused from paper-based to cardboard-based shipments. They're likely struggling with paper industry issues--China is a disruptor by sucking up the used paper in the States then re-processing it. The high American dollar doesn't help. It's a well-managed company.
Stockchase Research Editor: Michael O'Reilly With increased e-commerce, packaging has increased as well. This is something IP is well positioned to provide. Analysts at Wells Fargo and Bank of America have just upped their outlook to over $50. It trades at 16 times next year earnings, compared to 20 times for the broader market. The stock has had a good run up lately, so we would look to buy this on a pullback towards $36. Yield 4.61% (Analysts’ price target is $43.85)
He is neutral on this. The company has transformed its business over the last 20 years from printing newspapers to making cardboard boxes. This is both, a great growth industry and a very mature industry. The company sells at 15x earnings, which is a relatively high multiple for a mature business. International Paper is the leader in the industry, so the company is safe, but it will probably just continue to plug along. He would look elsewhere for an opportunity.