International Paper Company IP shares gained 6.5% to close at $56.26 following its investor day event yesterday. The company updated its financial targets for 2025 and 2027. International Paper outlined its strategic vision to achieve above-market growth by focusing on the right geographies, customers and products. It will also focus on optimizing operations and enhancing profitability to deliver shareholder value.

International Paper Updates Guidance for 2025

International Paper targets revenues at around $27 billion in 2025, incorporating the contribution from the DS Smith acquisition. This projects a 45% increase from revenues of $18.6 billion in 2024.

Revenues for North American Packaging Solutions are expected at around $15.5 billion on demand growth and prices.  EMEA Packaging Solutions' revenues are projected at around $9 billion. Weaker-than-expected volumes due to lower industrial production and decreased prices are expected to reflect on results. 

The Global Cellulose Fibers (GCF) segment is expected to contribute $2.5 billion in revenues for the year. 

The company forecasts adjusted total EBITDA to be in the band of $3.5-$4.0 billion for 2025. IP had reported adjusted EBITDA of $1.99 billion in 2024. 
The adjusted EBITDA for North American Packaging Solutions is projected in the band of $2.3- $2.5 billion. The metric for EMEA Packaging is in the band of $0.9-$1.1 billion. The GCF segment’s adjusted EBITDA is guided at $0.3- $0.4 billion.

Cash flow from operating activities is expected in the range of $2-$2.2 billion while free cash flow is expected in the band of $0.1-$0.3 billion. This includes a one-time deal and restructuring cost of $0.5 billion. 

IP’s 2027 Targets Suggest Solid Growth

For 2027, the company projects net sales at $26-$28 billion. The midpoint of the guidance represents a compound annual growth rate (CAGR) of 13.2% from $18.6 billion reported in 2024. This projection excludes the GCF segment, which the company plans to divest.

Adjusted EBITDA is envisioned at $5.5-$6 billion in 2027. The midpoint suggests a 42.5% CAGR over the 2024-2027 period.  This growth is expected to be driven by above-market volume growth, lower costs stemming from footprint rationalization, operations optimization and overhead reduction, as well as synergies from the DS Smith acquisition. 

Adjusted EBITDA for the North American Packaging Solutions is expected at $3.7-$4 billion. For EMEA Packaging Solutions, the metric is expected at $1.8-$2.0 billion.

The free cash flow guidance of $2-$2.5 billion for 2027 suggests a CAGR of 43.8% compared with 2024. IP has earmarked capital spending of around $1.9 billion per year from 2025 to 2027.

Strong Markets Poise IP for Solid Growth

International Paper is well-positioned to capitalize on strong market fundamentals in both North America and EMEA. North America’s Total Addressable Market (TAM) is around $50 billion and EMEA’s TAM is around $40 billion. Both markets have an estimated long-term growth rate of 3-4%.

The company expects to outperform market growth by riding on key industry trends, including the expansion of e-commerce, increasing demand for sustainable and recyclable packaging and the growing shift from plastic to paper-based alternatives. Additionally, rising demand for cost-effective, reliable fresh food packaging and innovative retail-ready packaging solutions is expected to support long-term growth.

IP Expects Higher Synergies From DS Smith Acquisition 

The company had earlier expected $514 million of pre-tax cash synergies from the DS Smith acquisition by 2027. This has now been updated to $600-$700 million. This increase factors in gains from applying the 80/20 strategic approach in EMEA, mill and box plant optimization and an increased reduction in overhead costs.

The DS Smith acquisition will create a global leader in sustainable packaging solutions. It will also strengthen customer value proposition through enhanced offerings, reliable service, differentiated innovation and greater geographic reach.

In the long term, the company aims for an annual revenue growth of 3-4%, EBIT growth of more than 5% and a dividend yield of 3-4%. IP targets to return 40-50% of its free cash flow to shareholders through dividends.

IP Stocks’ Price Performance

International Paper’s shares have risen 42.8% in the past year compared with the industry’s 8.8% growth.

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International Paper’s Zacks Rank and Stocks to Consider

International Paper currently carries a Zacks Rank #3 (Hold). 

Better-ranked stocks in the basic materials space are Axalta Coating Systems Ltd. AXTA, Carpenter Technology CRS and Silvercorp Metals SVM. AXTA currently sports a Zacks Rank #1 (Strong Buy) while CRS and SVM carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Axalta Coating Systems’ fiscal 2025 earnings indicates year-over-year growth of 8.5%. The company beat the consensus estimate in each of the trailing four quarters, delivering an earnings surprise of roughly 16.3%, on average. AXTA’s shares have gained 2.2% over the past year. 

The consensus estimate for Carpenter Technology’s fiscal 2025 earnings implies year-over-year growth of 46.6%. CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 15.7%. The company's shares have soared 185% in the past year. 

Silvercorp beat the consensus estimate in three of the last four quarters and was in line once, with the average earnings surprise being 11.5%. The Zacks Consensus Estimate for the company’s current fiscal-year earnings indicates year-over-year growth of 68.2%. SVM has gained around 33% in the past year.

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