nternational Paper {Ticker: IP, Closing Price: USD 21.83, Target Price: USD 28.00, Recommendation: Buy}.

* Strong Q3 . Adj. EPS of $0.37. DB & FC both at $0.24. Comps: 2Q09 = $0.20, 3Q08 = $0.84. Lower inputs & less d'time boosted results.
$30MM q/q swing at Ilim (Russia) & 30% tax rate helped. Strong CF & improving B/S worth noting. Comments about Q4 "significant" seasonal easing hit stock.

* Segments:

* Industrial Pkg . EBIT = $214MM, 09Q2 = $255MM, 08Q3 = $153MM.
Lower maint. (69K) & mkt (86K) d'time helped offset $33/ton in box prices. *$145/ton of EBITDA in NA, despite 463K of mkt d'time (@ $200/ton = $93MM or *$38/ton of EBITDA penalty) & drag from low- margin export sales.

* Printing Papers . EBIT = $138MM, 09Q2 = $86MM, 08Q3 = $210MM.
Vol's improved & NA mkt d'time fell 90K q/q, helping to offset lower prices (-$24/ton in NA, -E18 in Europe). NA EBITDA = $194/ton.

* Consumer Pkg. Best qtr in recent memory. EBIT = $68MM,
09Q2 = $38MM, 08Q3 = $6MM. Less d'time & lower inputs helped offset $23/ton drop in SBS prices.

* Xpedx. EBIT = $21MM, 09Q2 = $10MM, 08Q3 = $35MM. Improved vol's q/q & benefits from cost reduction efforts.

* CF & B/S . 3Q Operating CF (excl'g Black Liquor credits) = $600MM, paid down $1.3B in debt ($3/share) taking debt to $9.6B. Q3 cash = $1.65B (nearly $4/share).

* Q4 factors? (1) Seasonally lower vol's in NA, (2) increases on some inputs (pulpwood, freight, etc.), (3) $19MM more q/q in maint.,
(4) lower box prices, (5) higher pulp prices, and (6) lower interest exp.

* Change in view? If anything, more bullish. In midst of severe economic downturn & with disproportionate share of d'time, IP has cut post-WY debt by $3.1B. '10 should benefit from lower fixed costs & interest exp and potential vol recovery. Maintain Buy. Boosting Q4 from $0.18 to $0.20, FY10 from $1.25 to $1.35 and initiating FY11 with $1.70.