International Paper (IP): Time for Puts? AI Bearish Signal

International Paper is a global leader in sustainable packaging solutions, producing renewable fiber-based packaging and pulp products. The company operates manufacturing facilities in North America, Latin America, Europe, and North Africa. Its businesses are separated into two segments: 'Industrial Packaging' and 'Global Cellulose Fibers'. International Paper serves a broad set of customers across a wide range of growing end-markets. The company's strategy focuses on being the lowest-cost producer and the most reliable and innovative sustainable packaging solutions provider. This includes an '80/20 strategic approach' to deliver profitable market share growth by focusing on the most impactful areas, reducing complexity and costs, and aligning resources to win with strategic customers. International Paper is also committed to sustainability, aiming to create low carbon products and advance a low-carbon, circular economy.

IP's technical outlook is decidedly bearish. The stock price has experienced a significant decline over the past 90 days, plummeting from approximately $53.91 on July 29th to $36.56 as of November 4th. This sharp downtrend is confirmed by the current price being well below both the 50-day SMA of $46.49 and the 200-day SMA of $49.19, indicating sustained bearish momentum. Momentum indicators further support this bearish sentiment. The RSI is extremely low at 19.88, signaling oversold conditions, but in a strong downtrend, oversold conditions can persist. The MACD is deeply negative at -1.67, with the MACD histogram showing increasing negative divergence from its signal line, suggesting accelerating downward momentum. The ADX is elevated at 23.27, confirming the strength of the current downtrend. Furthermore, the Stochastic Oscillator is at 5.72, also indicating oversold conditions. The recent price action shows no signs of reversal, and with all major indicators aligned negatively, the outlook for IP remains bearish for the next 1-3 months. The stock is testing 52-week lows and could break below this level.

International Paper's MD&A presents a mixed financial landscape, particularly following the acquisition of DS Smith. `Net sales` increased substantially, rising $2,033 million to $6,767 million compared to the second quarter of 2024, and $866 million compared to the first quarter of 2025, driven by the DS Smith acquisition. However, this top-line growth hasn't translated into proportional profitability. The company reported a `Net earnings` of $75 million for the second quarter of 2025, down from $498 million in the second quarter of 2024. The `Net cash (used in) provided by operating activities` was $188 million for the first six months of 2025, significantly lower than the $760 million for the same period in 2024, with free cash flow at $(564) million versus $311 million in the prior year. This decline is attributed to approximately $670 million in significant payments, including DS Smith transaction costs and severance payments. Looking forward, the company anticipates seasonally higher sales volumes in PS NA, but also expects higher input costs driven by energy costs. They are also 'pursuing strategic options' for the Global Cellulose Fibers business, indicating potential divestitures. Overall, the integration of DS Smith is impacting the company's financials, and macroeconomic uncertainties pose ongoing challenges.

International Paper's Q2 2025 earnings call presents a moderately bullish outlook, driven by progress on its transformational journey. CEO Silvernail emphasized that the 'transformation is on track,' with Q2 revenue meeting expectations. While acknowledging that cost performance in North American mills and EMEA 'are not where we want them to be,' management maintains its 2025 EBITDA guidance, citing commercial and cost improvement efforts. The company is focused on deploying its 80/20 strategy, with Packaging Solutions North America showing accelerated momentum. Despite industry demand being 'softer than last year' in North America, IP expects to close the gap to industry by Q4. In EMEA, box shipments slowed sequentially, but June volumes showed signs of recovery. The company is taking actions to achieve its commercial excellence target of $1.1 billion by 2027, with approximately $650 million in run rate benefits achieved in the first half of the year. While mill reliability issues in North America have left $150 million of profit 'on the table,' the company is hyper-focused on improvement. The strategic review of the Global Cellulose Fibers business is progressing as expected, with a goal to close by year-end.

IP's financials reveal a complex and somewhat concerning picture. Revenue demonstrates a general upward trend, increasing from $4.601B in Q4 2023 to $6.222B in Q3 2025, but this growth has not translated into consistent profitability. The gross profit ratio has fluctuated, ending at 0.311 in Q3 2025, after dipping to 0.259 in Q1 2024. Net income swung from a loss of $284M in Q4 2023 to a profit in Q2 2024, only to plummet to a staggering loss of $1.102B in the most recent quarter, Q3 2025. While operating cash flow was positive at $605M in Q3 2025, prior quarters show volatility, including a negative $288M in Q1 2025. Total debt has increased significantly from $5.905B in Q4 2023 to $10.412B in Q3 2025, indicating increased leverage. The drastic net loss in the latest quarter, coupled with the rising debt, raises serious concerns about IP's financial stability and future performance.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting effective cost management. Return on Equity (ROE) has improved, showcasing efficient capital allocation. While the Price-to-Earnings (P/E) ratio is elevated, it is potentially justified by the company's growth prospects. The Debt-to-Equity ratio has decreased, reflecting a healthier balance sheet and reduced financial risk. The current ratio is at a healthy level, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable combination of growth, profitability, and balance sheet strength, supporting a positive outlook for the next 12 months, although the high P/E ratio warrants close monitoring.