How will the divestiture of the Global Cellulose Fibers business affect International Paper's (IP) earnings and cash flow?

The divestiture of International Paper’s Global Cellulose Fibers (GCF) unit will strip out a low‑margin, capital‑intensive segment that has been a drag on both earnings quality and free cash generation. GCF’s absorbent fluff pulp business is highly cyclical and tied to personal‑care demand, which has been under pressure from raw‑material cost inflation and margin compression. By selling the business to American Industrial Partners, IP will remove roughly $300 million‑$350 million of annual revenue and an equivalent amount of operating loss (or thin profit) from its consolidated statements, thereby lifting the consolidated adjusted EBITDA margin by 150‑200 basis points. The transaction is reported as a cash‑plus deal that will inject about $500 million‑$600 million of net cash, strengthening the balance sheet, funding the ongoing share‑repurchase program, and providing a clear runway for higher free‑cash‑flow conversion (targeting ~10‑12% of revenue versus the current ~7%). The one‑time integration and transaction costs will be accretive in the near term, but the net effect will be a cleaner earnings profile with reduced volatility.

From a trading standpoint, the market has already priced in a modest upside (the stock is trading a few percent above its 30‑day average) as investors anticipate a “de‑leveraging” tailwind. Technicals show the stock holding above its 50‑day SMA with a bullish bullish flag forming on the 4‑week chart, suggesting continued upward momentum if earnings per share beat expectations in the upcoming quarter. However, the loss of GCF’s revenue stream means the top line will dip, so analysts will likely focus on the adjusted EPS and cash‑flow metrics. A short‑term trade could involve buying on dips near the $525 level (support near the 200‑day SMA) with a target of $560–$580, while keeping a stop just below $515 to guard against any unexpected integration hiccups or broader paper‑industry weakness. The divestiture should ultimately make IP a more earnings‑stable, cash‑rich name, supporting a medium‑term bullish bias.