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On Monday, Citi analysts provided insights into the containerboard market, noting that prices have remained steady in March following a $40/ton increase in February. The benchmark North American kraftliner price has been reported at $945/ton, aligning with market expectations. According to a recent survey, half of the respondents indicated that prices have stabilized since the increase, while 35% experienced the $40/ton hike for the first time, and 15% have yet to see any price rise this year. For industry leader International Paper (NYSE:IP), which generates $18.62 billion in annual revenue, this pricing stability comes as the stock shows a strong 35% return over the past year, according to InvestingPro data.
The analysts also highlighted that corrugated box prices have seen a rise of 6-8%, despite some resistance from buyers against frequent price hikes in a market with generally stagnant demand. First-quarter demand trends for 2025 seem to be inconsistent, with reports of both shipment growth and flat performance. Industry sources have described a rush by some producers to maximize shipments ahead of impending tariffs, resulting in a "mad scramble," while others have observed a decrease in orders for March and April. Despite market uncertainties, InvestingPro analysis shows IP maintaining its impressive 55-year streak of dividend payments, currently offering a 3.6% yield, with multiple additional ProTips available for subscribers.
Mill backlogs, which have been averaging around 4-6 weeks since September 2024, have recently dropped to approximately 4 weeks. This decline is attributed to uneven demand and the uncertainty surrounding tariffs. Despite the inflationary environment, Citi forecasts that containerboard prices will remain unchanged through the end of the year. They consider another price increase for linerboard in the second quarter unlikely due to the diminishing backlogs and the prevailing economic uncertainty.
The commentary from Citi, including their predictions and observations from the industry, suggests a neutral impact on companies like International Paper (NYSE:IP), WestRock (NYSE:WRK), and Packaging Corporation of America (NYSE:PKG). As the market absorbs the effects of the recent price movements and braces for potential tariff implementations starting April 2, the forecast for containerboard prices through the remainder of the year remains flat.
In other recent news, International Paper has reported several significant developments. The company recently became the guarantor for DS Smith Limited’s outstanding notes, as confirmed in a Securities and Exchange Commission filing. This move aligns DS Smith’s financial obligations with International Paper’s debt securities provisions. Citi analysts have reinstated a Buy rating for International Paper, setting a price target of $60, with expectations of substantial earnings growth driven by cost reductions and synergies from the DS Smith acquisition. The analysts project International Paper’s EBITDA to reach approximately $5 billion by 2027.
Additionally, JPMorgan initiated coverage on International Paper with an Overweight rating and a $59 price target, highlighting the company’s potential for increased profitability under new CEO Andy Silvernail. The firm anticipates the integration of DS Smith will play a critical role in doubling the company’s EBITDA in the medium term. Meanwhile, International Paper has announced the closure of four U.S. facilities by April 2025, affecting 674 employees, as part of its strategic shift towards sustainable packaging solutions. S&P Global Ratings upgraded DS Smith’s credit ratings to align with International Paper’s, following the completion of the acquisition. These developments underscore International Paper’s ongoing transformation and strategic initiatives in the packaging industry.
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