NEW YORK (TheStreet) -- Shares of International Paper (IP - Get Report) were falling 2.9% to $49.67 on heavy trading volume after analyst firm Macquarie lowered its price target for the packaging and container company.
Macquarie lowered its price target for International Paper to $48 from $54 in a note to investors about containerboard makers. Analyst Al Kabili said it is difficult to get excited about containerboard stocks as there is a risk that margins and earnings may have peaked in the current cycle, according to Street Insider.
"On Friday evening, PPW published a $20/ton price cut on medium prices and more importantly a $10/ton price cut on linerboard US West price indices due to competitive conditions in California," Kabili wrote. "While we had specifically not been expecting the published price cut (particularly for linerboard), we had noted the containerboard market has been looser than it has been in years and we were concerned of mounting pressures, heightened competitive activity, and some areas of price weakness that we had been hearing about."
About 6.1 million shares of International Paper were traded by 3:09 p.m. Monday, above the company's average trading volume of about 2.9 million shares a day.
Insight from TheStreet's Research Team:
International Paper is a core holding of the TrifectaStocks.com portfolio. During the most recent weekly roundup, this is what Bryan Ashenberg and Bob Lang, Portfolio Co-Managers, had to say about the stock:
International Paper (IP:NYSE, 288 shares, 3.95%) shares managed to eke out a fractional gain this week on little company-specific news. The company's strong dividend yield and its active share repurchase program, supported by its robust free cash flow generation, continue to mitigate downside from current levels. We believe improved economic conditions could fuel upside, though pricing trends must be continually monitored. Our price target is $60.
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 a few notable 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 notable return on equity, good cash flow from operations, increase in stock price during the past year, growth in earnings per share and increase in net income. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Paper & Forest Products industry and the overall market, INTL PAPER CO's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $638.00 million or 35.45% when compared to the same quarter last year. Despite an increase in cash flow, INTL PAPER CO's average is still marginally south of the industry average growth rate of 40.96%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- INTL PAPER CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, INTL PAPER CO reported lower earnings of $1.33 versus $3.81 in the prior year. This year, the market expects an improvement in earnings ($3.92 versus $1.33).
- IP, with its decline in revenue, slightly underperformed the industry average of 0.9%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: IP Ratings Report