International Paper Stock: Is IP Underperforming the Consumer Discretionary Sector?

Company Overview - International Paper Company (IP) is a leading producer of fiber-based packaging, pulp, and paper products, with a market cap of $24.5 billion [1] - The company offers a range of industrial packaging solutions, including containerboard, corrugated packaging, specialty papers, and pulp for hygiene and personal care items [1] Market Position - IP is classified as a "large-cap stock," highlighting its size, influence, and dominance in the packaging and containers industry [2] - The company has a strong reputation for innovation and sustainability, aligning with the increasing demand for eco-friendly products from customers and regulators [2] Stock Performance - IP shares have declined 23.1% from their 52-week high of $60.36, reached on November 25, 2024, and have underperformed compared to the Consumer Discretionary Select Sector SPDR Fund (XLY), which returned 14.7% over the same period [3] - Over the past 52 weeks, IP has declined 7.1%, significantly lagging behind XLY's 22.5% increase [4] - Year-to-date, IP shares are down 13.7%, while XLY has risen by 7.6% [4] Recent Earnings Report - Following its Q2 earnings release, IP shares dropped 12.9% on July 31 [5] - The company's revenue increased by 42.9% year-over-year to $6.8 billion, meeting consensus estimates, but its adjusted operating EPS of $0.20 fell short of analyst expectations by 47.4% [5] - A significant decline in margins due to cost headwinds, weaker demand in Europe, and increased depreciation and amortization expenses led to a 63.6% annual decline in adjusted operating earnings per share [5] - Free cash flow contracted 67.7% year-over-year to $54 million, raising investor concerns and contributing to the stock's selloff [5]