Goldman Sachs Upgrades International Paper (IP) to Conviction Buy; Sees 25% Upside
Tweet
Share
E-mail
Get Alerts IP Hot Sheet
Price: $34.43 +0.06%
Rating Summary:
10 Buy, 8 Hold, 6 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
Rating Summary:
10 Buy, 8 Hold, 6 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
Join SI Premium – FREE
Goldman Sachs upgraded shares of International Paper (NYSE: IP) from Neutral to Conviction Buy Thursday with a price target of $55.00 (from $50.00), suggesting 25% upside.
In its upgrade report, Goldman's analyst said they are buyers of IP stock for its leverage to containerboard prices, higher free cash flow (FCF) and their forecast for a shift in capital allocation from debt reduction and M&A to share buybacks.
The firm said they believe the successfully implemented fall $50/ton and spring $50/ton price hikes are sustainable. They also expect IP's EBITDA growth to accelerate to 28% in the 2H2013 versus 11% in the 1H2013 largely driven by higher containerboard prices. Most importantly, they see a significant step-up in IP's FCF. The analyst estimates $2.023 billion in FCF per annum over the 2013-2015 timeframe which compares to $1.477 billion on average over the 2008-2012 time period.
Goldman sees a inflection for capital allocation at IP. Specifically, they see the company its Moody's defined debt target of < 3X by year-end 2013, early 2014 which will shift the focus from debt reduction to share buybacks. Goldman expects the company will repurchase $2.5 billion or 13% of the current market cap from 2014-2015 after essentially no share buybacks over the last six years.
The firm trimmed FY 2013 EPS estimate from $3.51 to $3.41, but raised FY 2014 EPS estimate from $4.62 to $4.64 and FY 2015 EPS estimate from $4.99 to $5.04.
For an analyst ratings summary and ratings history on International Paper click here. For more ratings news on International Paper click here.
Shares of International Paper closed at $44.03 yesterday.
In its upgrade report, Goldman's analyst said they are buyers of IP stock for its leverage to containerboard prices, higher free cash flow (FCF) and their forecast for a shift in capital allocation from debt reduction and M&A to share buybacks.
The firm said they believe the successfully implemented fall $50/ton and spring $50/ton price hikes are sustainable. They also expect IP's EBITDA growth to accelerate to 28% in the 2H2013 versus 11% in the 1H2013 largely driven by higher containerboard prices. Most importantly, they see a significant step-up in IP's FCF. The analyst estimates $2.023 billion in FCF per annum over the 2013-2015 timeframe which compares to $1.477 billion on average over the 2008-2012 time period.
Goldman sees a inflection for capital allocation at IP. Specifically, they see the company its Moody's defined debt target of < 3X by year-end 2013, early 2014 which will shift the focus from debt reduction to share buybacks. Goldman expects the company will repurchase $2.5 billion or 13% of the current market cap from 2014-2015 after essentially no share buybacks over the last six years.
The firm trimmed FY 2013 EPS estimate from $3.51 to $3.41, but raised FY 2014 EPS estimate from $4.62 to $4.64 and FY 2015 EPS estimate from $4.99 to $5.04.
For an analyst ratings summary and ratings history on International Paper click here. For more ratings news on International Paper click here.
Shares of International Paper closed at $44.03 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Citi Upgrades United Microelectronics Corp (2303:TT) (UMC) to Buy 'with limited downside'
- Mizuho Upgrades Airbnb Inc. (ABNB) to Buy, 'We see opportunities'
- Deutsche Bank Upgrades MSCI Inc. (MSCI) to Buy, 'Compelling entry point for long-term investors'
Create E-mail Alert Related Categories
Analyst Comments, Analyst EPS Change, Analyst PT Change, Hot Upgrades, Rumors, Stock Buybacks, UpgradesRelated Entities
Goldman Sachs Conviction Buy List, Goldman Sachs, Raising PricesSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
