International Paper (IP) to Post Q4 Earnings: What to Expect

Core Viewpoint - International Paper Company (IP) is expected to report a significant decline in both sales and earnings for the fourth quarter of 2023, reflecting ongoing challenges in the packaging market due to inflationary pressures and changing consumer demand [2][4]. Q4 Estimates - The Zacks Consensus Estimate for IP's fourth-quarter sales is $4.68 billion, indicating an 8.8% decrease from the same quarter last year [2]. - The consensus estimate for earnings is 34 cents per share, representing a year-over-year decline of 61% [2]. - Earnings estimates have remained unchanged over the past 30 days [2]. Q3 Performance - In the last reported quarter, International Paper experienced a year-over-year decline in earnings due to lower revenues, with the top line missing the Zacks Consensus Estimate while the bottom line exceeded it [3]. - The company has surpassed the consensus estimate in each of the last four quarters, achieving an average earnings surprise of 20.8% [3]. Factors to Note - Weak packaging demand has been observed, influenced by inflationary pressures that have shifted consumer priorities towards non-discretionary goods [4]. - Customers and the retail channel are working to reduce elevated inventories, leading to declines in corrugating packaging and containerboard volumes [4]. - A slight pickup in volumes is projected for the fourth quarter, with corrugating packaging volumes estimated at 2,454 thousand short tons (up 0.4% year-over-year) and containerboard volumes at 600 thousand short tons (up 9.9% year-over-year) [4]. Industrial Packaging Segment - The Industrial Packaging segment is expected to see year-over-year volume growth in recycling (0.1%), Saturated Kraft (0.3%), and Gypsum/Release Kraft (0.2%) [5]. - Overall volumes for the Industrial Packaging segment are projected at 4,051 thousand short tons, indicating a 1.7% growth from the prior-year quarter [5]. - However, lower prices are anticipated to offset the impact of higher volumes, with average realized pricing expected to decline by 8.8% year-over-year [6]. - Revenues for the Industrial Packaging segment are projected to decrease by 7.2% year-over-year to $3,867 million, with operating profit expected to plunge 45% year-over-year to $229 million [6]. Global Cellulose Fibers Business - The Global Cellulose Fibers business is experiencing solid consumer demand for absorbent pulp products, with volumes expected at 714 thousand metric tons (up 0.5% year-over-year) [7]. - Pricing is anticipated to decline by 18.9% year-over-year, leading to an estimated revenue drop of 18.5% to $686 million for the fourth quarter [7]. - The segment's operating profit is projected to decline by 79% from the prior-year level to $7.3 million due to higher costs and maintenance outage expenses [7]. Earnings Prediction - The model predicts an earnings beat for International Paper, supported by a positive Earnings ESP of +1.74% and a Zacks Rank of 1 (Strong Buy) [8]. Price Performance - Shares of International Paper have decreased by 0.6% over the past year, contrasting with the industry's growth of 6.4% [9].