The New King Of The Forest: International Paper

You can hardly blame the folks at International Paper Co. for strutting a bit. After languishing for years as an undistinguished and inefficient No. 3, IP had average annual profit growth of 63.3% between 1986 and 1989. Thanks to a smart acquisition spree, IP is now the leader in the paper industry worldwide. But even IP is discovering it can't maintain its earnings momentum in the unforgiving paper business.

There's no doubt that Chief Executive John A. Georges has substantially remade the company since his arrival in 1984. To make IP less vulnerable to the wild cyclical swings of the U. S. industry, he has vastly expanded its presence overseas and increased its focus on high-margin specialty products. But even though these moves have helped the company outperform its now-troubled industry, they haven't been enough to prevent steep profit declines in 1990 and the first three quarters of this year. Now, the question is whether Georges has successfully positioned IP for a durable earnings rebound once the industry recovers.