International Paper Co (IP)

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International Paper shares fall after downgrade
Analyst downgrades International Paper stock on prospects for a dividend cut, stock falls
Monday February 2, 2009, 10:25 am EST
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NEW YORK (AP) -- International Paper Co. shares fell shaprly Monday after a Wall Street analyst said he expects the biggest paper and forest products company in the United States to cut its dividend by midyear.

Goldman Sachs analyst Richard Skidmore downgraded the stock to "Sell" from "Neutral" to reflect the company's fourth quarter 2008 earnings shortfall in its core business, an expected loss for this year and his expectations IP will cut its dividend.

"Although IP stock is down 23 percent year to date, we do not believe the market has factored in an earnings loss for IP in 2009, which increases, in our view, the probability of a dividend cut by mid-2009," he wrote Monday in a client note.

Skidmore also chopped his share price forecast by more than half.

"Combined with a challenging near-term cyclical outlook for uncoated freesheet and containerboard prices and demand, we see negative 2009 earnings per share and a dividend cut as catalysts to pressure IP shares to our new $6 per share six-month price target (from $14), implying 34 percent potential downside."

Further, the analyst forecast a loss of 30 cents a share for International Paper in contrast with his earlier projection of a profit of 70 cents a share. A poll of analysts found an average expectation for IP's earnings this year of 41 cents a share, according to Thomson Reuters.

Shares fell 91 cents, or 10 percent, to $8.21 in morning trading after falling to a 52-week low of $8.05 earlier in the session.