Japan PPI inflation slips to 11-mth low in July
Investing.com -- JP Morgan downgraded International Paper to Neutral from Overweight, warning that earnings expectations for both 2025 and 2027 appear too optimistic following a weaker-than-expected second quarter.
The brokerage said EBITDA missed its forecast by around 4%, with less pricing upside left for the second half of the year than previously assumed.
JP Morgan now expects 2025 EBITDA to come in about 1% below the low end of the company’s $3.5 billion guidance, citing more challenging cost-saving targets ahead.
Investor confidence in International Paper’s long-term targets also appears to be fading. JPM said post-earnings conversations revealed growing skepticism around the company’s 2027 guidance of $5.5–$6.0 billion in EBITDA. JPM’s own 2027 forecast sits at $4.7 billion, well below consensus, which has risen to $5.1–$5.25 billion.
Expectations into 2025 and 2027 look too high and create headwinds for the shares, according to JPM, adding that while U.S. market dynamics are improving, those benefits apply to the broader industry.
Brokerage reaffirmed its preference for Smurfit WestRock (NYSE:WRK), which trades at a 20% discount to IP and has what JPM called more achievable expectations.
Valuation on IP remains reasonable, with a forward FCF yield of 6.5%, but the firm lowered its December 2026 price target to $54 from $55, citing modest cuts to free cash flow estimates.
JPM sees structural improvements in the U.S. paper market, supported by capacity cuts and disciplined pricing. But it flagged Europe as a continued drag, with little sign of a recovery in the near term.