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International Paper Company (IP), Packaging Corp Of America (PKG), MeadWestvaco Corp. (MWV): Making Paper for Your Portfolio

International Paper Company (NYSE:IP) is one of those large-cap stocks you buy and put away for the long term. That is, until an activist investor gets involved. I like investing in stocks with catalysts, and as a result, I found International Paper Company (NYSE:IP) compelling back in May, when Loeb laid out his thesis for IP.

Is International Paper A Good Stock to BuyThe company is the world’s largest paper- and forest-products company, with the leading market share, around 35%, in containerboard manufacturing in the U.S.

Loeb believes that International Paper Company (NYSE:IP)’s de-leveraging, where it has reduced debt by $10 billion over the last four years, should afford it the opportunity to start throwing off some of its robust free cash flow to shareholders. Loeb notes that International Paper Company (NYSE:IP) should generate $2 in free cash flow per share in the near term, supporting a solid dividend boost.

The company was up nicely a couple of weeks ago, 6% to be exact, which is a large move for an “un-sexy” large-cap paper company. This was due to a positive 2Q EPS report. The company managed to post EPS of $0.64, which was up over 20% year-over-year and $0.08 above consensus.

Other big news is that every segment saw growth; industrial packaging revenue was up 10% year-over-year, the printing-paper segment was up 2% and consumer packaging advanced 10%.
The end-uses of IP’s products are, well, endless. This includes brochures, pamphlets, books, direct mail, envelopes, forms, cups, lids, plates, and packaging for tobacco, cosmetics, and pharmaceuticals.
One of the nice things about International Paper Company (NYSE:IP) is that it’s not satisfied with just dominating the U.S. paper market. The company is making investments in the likes of the BRIC countries (Brazil, Russia, India and China). Earlier this year, International Paper Company (NYSE:IP) completed its joint venture deal with Brazil’s Jari Celulose for three containerboard mills and four box plants in Brazil.
Playing with paper
A couple of other major paper companies include Packaging Corp Of America (NYSE:PKG) and MeadWestvaco Corp. (NYSE:MWV). During the 2Q, Packaging Corp Of America (NYSE:PKG) posted EPS of $0.71, versus the $0.49 for the same period last year, and above the $0.65 consensus. The company expects revenue to be up 12% in 2013 and 4% in 2014. Impressive numbers.
Helping drive the rise in revenue includes the fact that prices were upped last year for the first time in two years. Last month, Jefferies reiterated its hold rating, but upped its price target from $48 to $49. Jefferies said that it is “…encouraged [Packaging Corp Of America (NYSE:PKG)] continues to see strong demand in July and has realized the full box price increase already.”

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