International Paper (IP) Stock Down After IRS Proposed New Tax Rules

NEW YORK (TheStreet) -- Shares of International Paper Co  (IP) are down 4.94% to $51.08 on heavy volume in Tuesday's trading session, after the IRS proposed a new tax rule for packaging companies.

Under the new rule, processing of timber includes making sawdust, untreated lumber and woodchips. This would make the tax break unavailable after chemicals or foreign substances are added and it's turned into paper, pulp and plywood, Bloomberg reports.

Packaging companies will not be able to separate their containerboard operations into tax-advantaged vehicles, Bloomberg added.

As of 3:43 p.m. ET today, about 8.74 million shares of International Paper have exchanged hands, compared to its average daily volume of about 2.69 million shares. 

Memphis, TN-based International Paper is a paper and packaging company that operates in three segments including industrial packaging, printing papers, and consumer packaging.

The company operates roughly 25 pulp, paper and packaging mills, 181 converting and packaging plants, 18 recycling plants and three bag facilities in the U.S.

Insight from TheStreet's Research Team:

International Paper is a part of the TrifectaStocks.com portfolio. Here is what Bryan Ashenberg and Bob Lang, Portfolio Co-Managers, had to say about the stock in a recent alert:

This morning, model portfolio holding International Paper (IP:NYSE) reported modestly positive first-quarter results. The shares were recently trading at $53.12, off a fraction on the day.

The company reported operating earnings per share (EPS) of $0.84, ahead of consensus estimates of $0.80. Negative foreign currency exposure hurt earnings to the tune of $0.04 in the quarter. Revenues declined 3.6% year over year to $5.52 billion, below the $5.82 billion consensus estimates. The company generated $938 million in EBITDA in the first quarter, up from $906 million a year ago.

Management took 140,000 tons of downtime in North American containerboard during the quarter, all of which was maintenance related. IP's U.S. box shipments were up 1% in the quarter and pricing was lower. Europe saw a 1% decrease in containerboard volumes, and pricing was being pressured by FX rates. The box business is experiencing a nice seasonal uptick in April. Management still believes they can grow the company's EBITDA by roughly 5% in 2015.

The company continues to generate robust free cash flow, totaling $319 million this quarter, as compared with $739 million last quarter and $252 million a year ago. Management bought back $139 million of stock in the quarter, and paid out $169 million in dividends. EBITDA margin came in at 17% in the first quarter, up from 16.9% last quarter and 15.8% a year ago. North American industrial packaging achieved 22.9% EBITDA margins, up from 22.7% last quarter and 22.5% a year ago, and continues to be strongly ahead of its competitors' margins.

We continue to be bullish on the name, with a solid capital return program in place, upside from a potential MLP structure and with opportunities tied to a global macroeconomic recovery.

- Bryan Ashenberg and Bob Lang, 'International Paper Tops Estimates' originally published 4/29/15 on Trifecta Stocks.

Want more information like this from Bryan Ashenberg and Bob Lang BEFORE your stock moves? Learn more about Trifecta Stocks now.

Separately, TheStreet Ratings team rates INTL PAPER CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate INTL PAPER CO (IP) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, notable return on equity, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

You can view the full analysis from the report here: IP Ratings Report

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