International Paper Earnings: Near-Term Demand Headwinds Do Not Change Our Long-Term Outlook

No-moat-rated International Paper reported second-quarter results that were largely in line with our expectations. Revenue decreased 13% year over year as both segments experienced double-digit declines amid additional inventory destocking during the quarter. That said, management noted a recent slowdown in destocking and expects much of the trend to be behind the firm, which could provide a tailwind for volume growth in the second half of the year. Consolidated operating margins declined 300 basis points from a year ago to 7.0%, as the pullback in volumes was met with lower prices across IP’s portfolio. As such, we've decreased our fair value estimate to $42 from $44 per share due to lower near-term revenue and profitability in our forecast.