Industry Reports

Deutsche Bank Reports Summaries

070802 Deutsche Bank Report - IP's 2Q in 100 Words

Deutsche Bank - Equity Research

International Paper {Ticker: IP.N, Closing Price: USD 35.59, Target Price: USD 45.00, Recommendation: Buy}.

About in-line. Pointing to EPS of $0.52 net of special items. DB @ $0.55 & FC @ $0.54. Comps: 1Q07 = $0.47, 2Q06 = $0.35. Overall earnings quality looks fair - lower tax rate & no q/q decline in land sales, balanced by increase in "other" expenses & Pensacola conversion costs.

Papers . EBIT: $249MM, 1Q07 = $231MM, 2Q06 = $200MM. Initially seems light, considering full qtr of Luiz Antonio & higher prices (UFS +$16/ton q/q, pulp & int'l prices also higher). Issues: $20MM q/q rise in m'tce outages, weak vol's (partly due to Pensacola ).

Industrial Pkg . EBIT: $139MM, 1Q07 = $103MM, 2Q06 = $86MM. Solid qtr - impressive amount of y/y gain.

Consumer Pkg . EBIT: $48MM, 1Q07 = $61MM, 2Q06 = $44MM. $13MM q/q rise in m'tce outages, weak music market.

Forest Prod's . EBIT: $98MM, 1Q07 = $100MM, 2Q06 = $160MM. Expecting $110-140MM in 3Q.

Other : (1) Still $1.68B in cash. Share count declining steadily (repurchased $675MM in Q2, $1.073B YTD). (2) Corp expense at $179MM, +$15MM q/q, flat y/y. (3) New est. of '07 int. exp. = $310MM ($20MM lower). (4) Much Pensacola c'tbd tonnage will go offshore. (5) 3Q will see $30MM in less m'tce & $20MM more in land sales.

Change in view? Not really. Int'l initiatives paying off, but domestic mkts remain sluggish. IP execution seems solid & returning

$$$ to holders. No change to annual est's: '07 = $2.25 (3Q = $0.65) and '08 = $2.50.