International Paper 1Q Surges 89% On $540 Million Tax Credit

International Paper Co.'s (IP) first-quarter net income surged 89% on a $540 million tax credit, as the company reported flat revenue but improved profit margins.

The company cut expenses as deteriorating demand, high costs and a sluggish housing market sapped its core businesses.

International Paper reported net income of $261 million, or 61 cents a share, up from $138 million, or 31 cents a share, a year earlier. Excluding items like the alternative fuel credits, earnings slumped to 8 cents a share from 41 cents a share.

Revenue remained flat at $5.67 billion.

Analysts polled by Thomson Reuters expected a loss of 4 cents on $6.28 billion in revenue.

Its gross margin rose to 34.2% from 24.8%, but increased overhead and write-downs hurt the bottom line.

Revenue from the printing paper division fell 23%, but profit surged 64% as strong mill operations and lower costs were met with continued weak demand in the global paper and pulp markets. Except for pulp, International Paper said pricing remained fairly steady in North America. Industrial packaging revenue surged 51% as its profit more than tripled.

International Paper's shares were inactive premarket after closing Wednesday at $10.90. The shares have fallen nearly two-thirds since September but rebounded sharply from a low of $3.93 last month.

-By Veronica Dagher and John Kell, Dow Jones Newswires; 201-938-5400; [e-mail]