International Paper Warns of Tough 2027 as DS Smith Split Advances

International Paper Company expects business conditions to remain difficult into 2027 as weak demand and ongoing inflation weigh on results. Speaking at a Baird conference, Chairman and Chief Executive Officer Andy Silvernail described 2027 as likely to be a slog, though he stated that the packaging maker is positioned to navigate the environment and anticipates third-quarter EBITDA margin gains to continue through the fourth quarter.

The company is moving forward with separating DS Smith through either a spinoff or a sale. Silvernail confirmed that International Paper is taking a dual-track path and sticking to its original 12- to 15-month separation schedule, noting that the transaction could conclude by the first quarter of next year at the very latest. A review of DS Smith's operations revealed fewer customer and cost synergies than originally anticipated, largely because packaging purchasing contracts are typically established between individual production facilities rather than through global agreements.

To counteract cost pressures, International Paper intends to implement an additional $250 million to $350 million in expense cuts alongside $900 million to $1.1 billion in price increases next year. Silvernail noted that major turnaround actions are mostly finished, with the company closing assets, removing approximately 20% of its overall capacity, and doubling capital expenditures across its North American footprint over the past couple of years.

The updates follow third-quarter financial figures that saw revenue fall 0.4% year-over-year to $6.2 billion, missing expectations despite adjusted earnings per share of $0.37 topping forecasts. Profitability was pressured by a $1.4 billion non-cash goodwill impairment charge in the European packaging unit, and free cash flow dropped to -$267 million. On October 28, 2026, management lowered the midpoint of its full-year North American packaging adjusted EBITDA forecast by about $110 million to a range of $2.27 billion to $2.31 billion, while withholding a 2027 financial outlook.

Despite operational headwinds, Wall Street sentiment remains largely supportive. TipRanks reports an overall analyst consensus of Strong Buy with an average price target of $42.25. Recent updates include RBC Capital analyst Matt McKellar reiterating a Buy rating with a $45.00 price target, while J.P. Morgan maintained a Buy rating on October 29 with a $51.00 target.