Profits in Paper

09/09/2013 7:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

This leading paper producer is an excellent big cap play due to the strong earnings outlook. The stock remains in good position to breakout at any time, says Leo Fasciocco, editor of Ticker Tape Digest.

Based in Memphis, International Paper Co. (IP), produces paper and forest products. Annual revenues are $28.5 billion.

It produces printing and writing papers, pulp, tissue, paperboard and packaging, and wood products. It also makes specialty chemicals, and specialty panels, and laminated products.

Its primary markets, and manufacturing, and distribution operations are in the US, Europe, and the Pacific Rim.

The stock hit a bear market low of $3.93 in early 2009. Since then it has roared back to a peak of 50.33, a 12-fold move. A breakout to a new multi-year high could draw in more buying.

The stock is in position to rally. The accumulation-distribution line is in a solid uptrend. It has held its ground well. That is a positive for bulls.

This year, analysts are forecasting a 26% jump in profits to $3.34 a share from $2.65 a year ago. The stock sells with a price-earnings ratio of just 14. We see that as low, making the stock a good value play.

Net for the next two quarters will be strong and show an acceleration in growth. That is very bullish. Profits for the third quarter should jump 34% to $1.01 a share, from 75 cents a year ago. The highest estimate on the Street is at $1.11. So, some are looking for a possible upside surprise.

Looking ahead to the fourth quarter, earnings should leap 52% to $1.05 a share, from 69 cents the year before. Going out to 2014, earnings are projected to climb 34% to $4.49 a share, from the anticipated $3.34 this year.

The stock had a breakout in July, but faded back. However, IP still remains in good position to breakout at any time. We see the stock in a good spot to be accumulated.

We suggest accumulation of a partial stake with further buying to be done on a breakout over $50.35. We are targeting the stock for a move to $62 after a breakout. A protective stop can then be placed near $46.

Institutional sponsorship is excellent. A key fund buyer recently was the 5-star rated Vanguard Equity-Income Fund which purchased 716,00 shares. Also, the 4-star rated BlackRock Equity Dividend Fund bought 4.8 million shares.

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