International Paper An Attractive Entry Point With Solid Dividend Yield, Says Analyst Despite Guidance Cut

RBC Capital Markets analyst Matthew McKellar upgraded International Paper Co IP rating to Outperform from Sector Perform at a lowered price target of $39.
The analyst is bullish on management's commentary in Q1 results related to Industrial Packaging shipments destocking in the retail channel and expects volumes to improve in 2023, mainly in H2.
However, McKellar is cautious about containerboard capacity additions in 2023, with U.S. liner board and medium prices remaining flat for two months.
Despite a 14% reduction in 2023 adjusted EBITDA guidance by the company, the analyst believes the current share price represents a solid entry point given an attractive dividend yield.
With the end of destocking, the analyst expects fluff pulp volumes (and share of mix) to recover from Q1 and sees favorable long-term trends for absorbent hygiene products.
The analyst projects fluff pulp prices to average $1,950/tonne in 2023 and $1,645/tonne in 2024, down from current pricing of $2,065/tonne and peak pricing of $2,230/tonne reached in mid-2022.
Price Action: IP shares are trading flat at $33.01 on the last check Friday.

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