In This Article:
International Paper Company IP is gaining from growth initiatives and ongoing investments to boost capacity and acquisitions.
IP is expected to see volume growth in its Industrial Packaging segment in the fourth quarter of 2024 and thereafter. This will be driven by stable demand in the e-commerce channel and strong momentum in the food and beverage sectors.
Let us delve deeper and analyze the factors that make the IP stock worth holding on to at present.
International Paper’s DS Smith Acquisition Deal
IP entered an agreement to acquire the entire issued share capital of DS Smith in April 2024. This marks a strategic move to strengthen its corrugated packaging business in Europe and prioritize sustainable packaging.
The buyout is expected to be accretive to its earnings in the first year of closure and provide at least $514 million of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following the closure. The acquisition is expected to close by the first quarter of 2025.
IP Witnesses Pickup in Demand Levels
International Paper noted a pickup in demand this year after softness through the major part of 2023 due to inventory destocking at customers’ end. The company is seeing stable demand in the e-commerce channel as packaging is critical in the supply chain to bring essential products to consumers. This trend is expected to continue.
In Food and Beverage, the fresh food business benefiting from consumer preference toward preparing meals at home rather than relying on processed food. Even though the Beverage segment has been under pressure, the company expects demand in this packaging-intensive segment to improve this year, backed by current trends.
Although volumes declined in the third quarter of 2024 due to seasonality, International Paper expects higher earnings sequentially for the Industrial Packaging segment in the fourth quarter of 2024, reflecting prior price index increases and lower costs. Volumes are expected to increase on seasonal trends.
International Paper’s Focus on Growth
IP has taken initiatives to drive growth. It has been streamlining and simplifying its organization to form a packaging-focused company. International Paper stated that it would optimize cost structure, make investments to strengthen its competitive and strategic assets, and reduce complexity in the business.
The company has recently said that it has been exploring options for the Global Cellulose Fibers business. Around 75% of the benefits from its strategic actions are expected in 2025.