International Paper Earnings: Softening Box Demand and Lower Prices Cause Near-Term Headwinds

International Paper reported lackluster first-quarter results as a decline in volumes was met with lower prices in the company’s packaging business. Revenue decreased 4% year over year as top-line strength in its fiber business was not enough to offset packaging declines. Elevated operating costs continued to weigh on the firm, with consolidated operating margins contracting 140 basis points from a year ago to 5.9%, despite benefits from recent cost management initiatives. Both segments continue to feel the effect of inventory destocking and moderating consumer spending, and we expect similar demand constraints to persist throughout the year. Nevertheless, we are maintaining our $44 fair value estimate.