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TheStreet Open House

6 Paper Stocks With Upside

Stocks in this article: FBRRKTIPUFSSONGLT

4. International Paper (IP), a global paper and packaging company, markets and manufactures paper with operations located across North America, Europe, Latin America, Russia, Asia and North Africa. It operates in five segments: industrial packaging, printing papers, and consumer packaging, distribution, and forest products. As of Dec. 31, 2010, IP operated 20 pulp, paper and packaging mills, 144 converting and packaging plants, 19 recycling plants and three bag facilities.

Of the 15 analysts covering the stock, 73% recommend a buy, while 13% rate a hold. Analysts polled by Bloomberg expect the stock to gain an average 15.1% to $36.4 in the upcoming 12 months.

For the first quarter of 2011, the company swung to a net income of $342 million, or 78 cents per share, as compared to a net loss of $162 million, or 38 cents per share, in the year-ago quarter. Net sales surged to $6.4 billion from $5.8 billion earlier, mainly led by strong performance in the company's global mill operations. In fact, the company's sales of corrugated box packaging soared significantly during the quarter. In early April, the company acquired a majority stake in India's largest paper producer -- Andhra Paper Mills.

Looking ahead, the company believes that the focus on improving its distribution business would improve its earnings by $140 million annually. Thereby, to achieve the target, International Paper plans to incur net cash costs of $100 million over the next three years for greater cost of capital return. Meanwhile, the company expects the additional cost of $50 million incurred in the second quarter would reduce earnings per share by 11 cents. However, it forecasts a strong second quarter with robust cash flow and earnings.

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