Published Wed, 16 Jan 2019 20:55:50 -0500 on Seeking Alpha
International Paper (IP) has dramatically underperformed the market in the past 12 months. During this period, the stock has lost 28%, whereas the S&P has shed only 7%. This is surprising, particularly given that the company posted record earnings in 2018, which were almost double the earnings of the year before. As International Paper is trading at a 10-year low price-to-earnings ratio of 8.3, it has become a cheap dividend stock. The big question is whether it has become a bargain.
International Paper is a leading global producer of renewable fiber-based packaging, pulp and paper products. It has manufacturing operations in North America, Latin America, Europe, North Africa, Russia and India. The company operates in three segments: Industrial packaging, global cellulose fibers and printing papers. In the first nine months of 2018, these three segments generated 69%, 12% and 19% of total revenues and 74%, 8% and 18% of total operating profit, respectively.
While International Paper has not reported its results for the fourth quarter of 2018 yet, it is safe to assume that the company almost doubled its earnings per share, from $2.88 in 2017 to approximately $5.30 in 2018. Although it faced headwinds from increased input and distribution costs, it more than offset these headwinds via a series of price hikes, thus taking advantage of the strong demand for its products, particularly in its most important segment, namely the... Read more
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