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On Wednesday, Citi reiterated its Buy rating and $60.00 price target for International Paper (NYSE:IP) shares, which currently trade at $56.26 with a market capitalization of $29.6 billion. The stock has shown remarkable strength, delivering a 53% return over the past year. The endorsement followed International Paper’s first investor day since 2012, where CEO Andy Silvernail and his team outlined a strategy expected to potentially triple the company’s EBITDA from 2024 to 2027. This ambitious growth is anticipated following the acquisition of DS Smith. According to InvestingPro analysis, the company maintains a FAIR overall financial health score of 2.48.
The company’s 2025 EBITDA guidance was slightly better than Citi had anticipated, projecting between $3.5 and $4.0 billion compared to the consensus estimate of $3.7 billion, a significant increase from the current EBITDA of $2.03 billion. International Paper aims to nearly double its legacy EBITDA by implementing cost reductions of $1.2 billion, net of inflation, and by enhancing commercial operations to contribute an additional $800 million, targeting an EBITDA of $3.7 to $4.0 billion. This forecast does not account for potential contributions from the sale of its Global Cellulose Fibers (GCF) business. Notably, the company has maintained dividend payments for 55 consecutive years, currently offering a 3.29% yield.
DS Smith’s acquisition is expected to add $1.1 billion to International Paper’s near-term EBITDA and generate $600 to $700 million in synergies by 2027, positively impacting both regions in which the company operates. Despite projecting lower near-term free cash flow generation, ranging from $100 to $300 million, due to planned reinvestments and restructuring, International Paper’s net leverage remains at a reasonable 2.7 times. This leverage ratio is within the company’s long-term target range of 2.5 to 2.8 times and does not include potential proceeds from the divestiture of GCF.
In the wake of the investor day, Citi finds International Paper’s post-acquisition valuation more compelling, leading to the firm’s reiterated Buy recommendation for the company’s stock.
In other recent news, International Paper has provided optimistic financial guidance for the coming years. The company projects total revenue to reach approximately $27 billion by 2025, surpassing previous estimates of $24.6 billion. Adjusted EBITDA for the same year is anticipated to be between $3.5 billion and $4 billion. Looking further ahead, International Paper forecasts its adjusted EBITDA to increase to between $5.5 billion and $6 billion by 2027, with net sales expected to be between $26 billion and $28 billion. The company’s free cash flow for 2027 is projected at $2 billion to $2.5 billion.
In terms of strategic moves, International Paper’s acquisition of DS Smith is expected to yield synergies estimated at $600 to $700 million. Analysts from Truist Securities have reiterated a Buy rating for the company, emphasizing the successful implementation of the 80/20 strategy and its potential for cost savings. Meanwhile, BofA Securities maintains a Neutral rating with a price target of $61, noting that International Paper’s financial guidance aligns with or exceeds their projections. Citi also reaffirmed a Buy rating with a price target of $60, highlighting the company’s slightly above-expectation financial targets.
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