Packaging and materials company International Paper (NYSE: IP) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 42.9% year on year to $6.77 billion. Its non-GAAP profit of $0.20 per share was 51.1% below analysts’ consensus estimates.

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Company Overview

Established in 1898, International Paper (NYSE: IP) produces containerboard, pulp, paper, and materials used in packaging and printing applications.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, International Paper struggled to consistently increase demand as its $21.93 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. International Paper’s annualized revenue growth of 4.1% over the last two years is above its five-year trend, but we were still disappointed by the results. We also note many other Industrial Packaging businesses have faced declining sales because of cyclical headwinds. While International Paper grew slower than we’d like, it did do better than its peers.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Industrial Packaging and Cellulose Fibers, which are 90.9% and 9.3% of revenue. Over the last two years, International Paper’s Industrial Packaging revenue (containers, displays, bins) averaged 9% year-on-year growth. On the other hand, its Cellulose Fibers revenue (materials) averaged 9.1% declines.

This quarter, International Paper reported magnificent year-on-year revenue growth of 42.9%, and its $6.77 billion of revenue beat Wall Street’s estimates by 1.9%.

Looking ahead, sell-side analysts expect revenue to grow 23.2% over the next 12 months, an improvement versus the last two years. This projection is eye-popping for a company of its scale and indicates its newer products and services will spur better top-line performance.

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Operating Margin

International Paper was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.5% was weak for an industrials business.

Analyzing the trend in its profitability, International Paper’s operating margin decreased by 7.3 percentage points over the last five years. We’ve noticed many Industrial Packaging companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction, but International Paper’s performance was poor no matter how you look at it. It shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, International Paper generated an operating margin profit margin of 1.7%, down 3.5 percentage points year on year. Since International Paper’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for International Paper, its EPS declined by 24.7% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

We can take a deeper look into International Paper’s earnings to better understand the drivers of its performance. As we mentioned earlier, International Paper’s operating margin declined by 7.3 percentage points over the last five years. Its share count also grew by 35.5%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For International Paper, its two-year annual EPS declines of 46.8% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, International Paper reported adjusted EPS at $0.20, down from $0.55 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects International Paper’s full-year EPS of $0.85 to grow 253%.

Key Takeaways from International Paper’s Q2 Results

We enjoyed seeing International Paper beat analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 7.6% to $49.62 immediately after reporting.

International Paper’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.