BofA maintains International Paper stock with $61 target

On Tuesday, BofA Securities maintained a Neutral rating on International Paper (NYSE:IP), with a steady price target of $61.00. According to InvestingPro data, the stock has shown strong momentum with a 34% return over the past year, while maintaining a relatively low volatility profile. Based on InvestingPro’s Fair Value analysis, the stock appears to be fairly valued at current levels. BofA Securities analysts highlighted the company’s recent analyst day presentation, which outlined financial guidance aligning with or exceeding their projections. International Paper’s EBITDA forecast for the current year is set at $3.5 to $4 billion, which is consistent with BofA’s estimate of $3.5 billion. The company’s last twelve months EBITDA stands at $2.03 billion, with InvestingPro analysis indicating positive net income growth expectations for this year. Looking ahead to 2027, International Paper targets an EBITDA range of $5.5 to $6 billion, surpassing BofA’s prediction of $4.8 billion.

The analysts anticipate that the market will respond favorably to the guidance provided by International Paper. Despite some investors’ expectations of a $6 billion EBITDA guide for 2027, the company’s target falls slightly short. In terms of free cash flow (FCF), International Paper projects $2 to $2.5 billion for 2027, notably higher than BofA’s normalized forecast of $1.5 billion. Current FCF yield stands at 3%, with the company maintaining an impressive 55-year streak of consecutive dividend payments. However, this year’s FCF guidance is between $100 and $300 million due to expenditures related to deals, restructuring, and capital investments pegged at $1.9 billion, compared to BofA’s estimate of approximately $1.75 billion. Get deeper insights into International Paper’s financial health and growth prospects with a comprehensive Pro Research Report, available exclusively on InvestingPro.

BofA’s preliminary review suggests that their EBITDA forecast differs from International Paper’s, partly due to an expectation of declining pulp prices in 2027. The analysts did not find specific references to near-term volume trends in North America and plan to revisit the material and discuss further with the company. Lastly, International Paper has indicated synergies from its DS Smith acquisition are now estimated at $600 to $700 million, which includes $100 to $200 million from the 80/20 strategy, aligning with BofA’s previous discussions on potential upside catalysts.

In other recent news, International Paper has provided updated financial guidance, projecting total revenue to reach approximately $27 billion by 2025, surpassing previous estimates of $24.6 billion. The company also anticipates adjusted EBITDA for the same period to be between $3.5 billion and $4 billion. By 2027, International Paper expects free cash flow to range from $2 billion to $2.5 billion and adjusted EBITDA to increase to between $5.5 billion and $6 billion. In analyst news, Citi has maintained a Buy rating on International Paper, with a price target of $60, while JPMorgan initiated coverage with an Overweight rating and a $59 price target, highlighting potential profitability under new CEO Andy Silvernail.

Additionally, International Paper has become the guarantor for DS Smith Limited’s outstanding notes, following the approval of amendments to the notes’ terms and conditions. These amendments aim to provide DS Smith with more flexibility within the International Paper group. The company has also increased its synergy target for DS Smith from $514 million to between $600 million and $700 million by 2027. Meanwhile, Citi analysts have noted a neutral outlook on containerboard prices, which have remained steady after a recent increase. These developments indicate International Paper’s strategic efforts to enhance financial performance and operational efficiency.

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