International Paper Earnings: Management Warns Tough Times Ahead as Strategic Overhaul Begins

No-moat-rated International Paper reported second-quarter results that were largely in line with our expectations. Net sales increased 1% year over year as both segments reported positive revenue growth while segment operating margin dipped slightly to 6.8%. Corrugated packaging end markets, which have been constrained for over a year, have recovered well in North America and index prices are rising. While challenges in Europe and some end markets remain, moderating input costs and higher selling prices should benefit International Paper through the second half of the year. We've increased our fair value estimate to $44 from $40 per share due to higher midcycle margins in our forecast.