We use EV/EBITDA as our primary valuation methodology, assigning a 9.5x target multiple to $4.0B estimated NTM EBITDA to derive a target price of $55. Our target multiple at the higher-end of IP's historical range (5.8x-11.5x over last 10 years) as we forecast accelerating earnings growth on cost out initiaitives.Our target implies 8.5x PF EBITDA when giving full credit for DS Smith synergies & cost out.

Containerboard supply/demand – Containerboard accounts for >85% of earnings; stronger demand for and/or tight supply conditions could cause Containerboard prices to rise and IP earnings to improve, while weaker demand and/or capacity additions could cause prices to fall and IP earnings to decline.

Pulp supply/demand – Global Cellulose Fibers (Pulp) has seen profitability challenges; weaker demand and/or capacity additions could cause prices to fall and IP earnings to continue to decline.

Currency risk – ~10% of EBITDA is generated outside of North America. Accordingly, a strengthening of the US dollar relative to the other currencies would negatively impact IP's earnings, while a depreciation of the US dollar would positively impact IP.

If the impact from the above risks turns out to be greater/less than we expect, the shares could fail to achieve our target price.