Shares of International Paper (NYSE:IP) closed about 11% higher on March 19. Further, IP stock gained about 1% in Tuesday’s after-hours trading. The market responded positively to the company’s announcement of Andrew Silvernail as its new CEO, effective May 1, 2024. Silvernail will take over from Mark Sutton, who will continue as Chairman to ensure a seamless change in leadership.
International Paper is a manufacturer of sustainable packaging, pulp, and other fiber-based products.
Investor optimism regarding this leadership change reflects confidence in Silvernail’s ability to steer the company in a more profitable direction. Notably, a comparison of IP’s stock performance against the SPDR S&P 500 ETF Trust (SPY), the proxy of the S&P 500 Index (SPX), shows that the company has significantly underperformed the broader market under Sutton’s tenure.
The image below shows that IP stock has declined by nearly 13% over the past five years, contrasting starkly with SPY’s impressive gain of 84%. Also, the company witnessed lower revenues and earnings in 2023 due to weak demand for IP’s products, declining sales prices, inventory issues, and a high inflation rate.
Here’s How Analysts Reacted
Citi analyst Anthony Pettinari cheered the company’s move to hire a new CEO. Pettinari upgraded International Paper stock to Buy from Hold and increased the price target to $46, up from $36. The analyst acknowledged that outgoing CEO Mark Sutton streamlined the company’s portfolio but believes there’s more work to be done. According to the analyst, Silvernail will likely overhaul the business and divest underperforming assets.
Echoing similar sentiments, Truist Financial analyst Michael Roxland expects Silvernail to implement portfolio rationalization actions, including pursuing strategic alternatives for underperforming businesses.
Is International Paper a Good Stock to Buy?
While the company is grappling with lower demand, it focuses on reducing fixed costs in its mill system, Industrial Packaging business, and the Global Cellulose Fibers division. International Paper is also focused on improving margins and mix and reinvesting in business. Further, the company maintains a solid balance sheet and returns cash to its shareholders.
With three Buy and five Hold recommendations, International Paper stock has a Moderate Buy consensus rating. Analysts’ average price target on IP stock is $38.87, which is in line with its closing price on March 19.
