On Jan 2, 2017, Zacks Investment Research upgraded International Paper Company (IP - Free Report) to a Zacks Rank #2 (Buy). Going by the Zacks model, companies holding a Zacks Rank #2 have high chances of performing better than the broader market in the quarters ahead.

Headquartered in Memphis, TN, International Paper is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia, and North Africa. The company employs approximately 58,000 people and is strategically located in more than 24 countries, serving customers worldwide.

The company outperformed the Zacks categorized Paper and Related Products industry, with an average return of 3.2% over the last month compared with 2.1% for the latter.Earnings estimates have remained steady over the same period. In addition the company also has a pretty favorable average surprise history, beating estimates thrice, in the trailing four quarters. Mergers and acquisitions remain a key strategy for International Paper to strengthen its long-term business proposition. In North America, the company envisions a large opportunity within its industrial packaging businesses, which continue to generate the best margins in the industry. The company is taking initiatives to drive further margin expansion over time across the businesses.

On Dec. 1, 2016, International Paper completed the acquisition of leading timberland owner Weyerhaeuser Co’s pulp business for $2.2 billion in cash. With a combined capacity of nearly 1.9 million metric tons of pulp, the transaction is likely to strengthen International Paper’s position in the global fluff pulp market and augment its operating cash flow. In addition, the company expects the acquisition to generate annual synergies of approximately $175 million by the end of 2018 along with a higher flexibility to manage a wide portfolio of products to meet customer needs through superior R&D capabilities and priceless patent portfolio.

One of the most important profitability metrics is Return on Equity (ROE). ROE reveals the amount of profit a company earned compared to the total amount of shareholder equity found on the balance sheet. International Paper currently has a ROE of 38.71%, whereas the industry’s ROE is 11.74%. The favorable ROE acts as growth driver for the company.

International Paper aims to utilize its sound cash flow by investing in capital projects, indulging in acquisitions, reducing its total debt and returning a greater proportion of cash to shareholders through increased dividend payouts and share repurchases. The company expects its EBITDA (earnings before interest, tax, depreciation and amortization) to increase by approximately 5% in the near future through diligent execution of its operational plans.

Other Stocks to Consider

Some other favorably ranked stocks in the industry include Macquarie Infrastructure Corporation (MIC - Free Report) , Carlisle Companies Incorporated (CSL - Free Report) and Hitachi, Ltd. (HTHIY - Free Report) . Hitachi and Carlisle Companies both carry a Zacks Rank #2 , whereas Macquarie Infrastructure sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Macquarie Infrastructure has a favorable earnings average surprise history of 29.6%, beating estimates twice in the past four trailing quarters.

Carlisle Companies has a long-term earnings growth expectation of 16% and is currently trading at a forward P/E of 18.9x.

Hitachi has a long-term earnings growth expectation of 13% and is currently trading at a forward P/E of 13.3x.