International Paper Co.’s (IP) third quarter EPS of $0.92 beat the Zacks Consensus Estimate. The company continues with its merger and acquisition strategy to strengthen its businesses. The merger with Temple-Inland will increase its share of the North American corrugated-packaging market from 27% to 40% and will be accretive to EPS in the first year.
Further, International Paper’s acquisition of a 75% stake in Andhra Pradesh Paper Mills will help capitalize on the burgeoning demand for paper and packaging products in India. Furthermore, through its joint ventures, International Paper has significant projects underway in Russia and China. These will help the company sustain its earnings growth.
We expect International Paper to continue utilizing its sound cash flow by investing in capital projects, acquisitions and reducing its total debt. Thus, we have upgraded our recommendation from Neutral to Outperform with a target price of $38.00.
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