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Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should baware that the firm may have a conflict of interest that could affect the objectivity of this report.

Investors should consider this report as only a single factor in making their investment decision.

PLEASE SEE ANALYST(S) CERTIFICATION(S) ON PAGE 3 AND IMPORTANT DISCLOSURES BEGINNINGON PAGE 4

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On April 28, 2010, IP reported 1Q EPS ex items, of $0.04 vs. $0.08 last year and $0.24 during 4Q09. Results were $0.03 below our $0.07estimate and in-line with the consensus view of $0.04. Relative to our expectations, the $0.03 per share negative variance in reportedresults was as follows: Consumer Packaging ($0.03), Industrial Packaging ($0.01), Distribution ($0.01), Printing Papers +$0.01, androunding items +$0.01. After further reviewing our model over the weekend, we are reducing our 2010/2011/2012 EPS estimates from$1.40/$1.55/$1.70 to $1.25/$1.40/$1.50, respectively. Despite the progress reported by trade publication Pulp and Paper Week onimplementing a $50/ton linerboard price hike in January and a $60 per ton hike in April, we maintain doubts on the probability ofimplementing combined box price hikes of $110 per ton this year. Our models continue to give IP and others credit for all of the January

May 03, 2010

International Paper(IP - US$ 26.74) 3-UnderweightEarnings Review/Sales Analysis

Modestly Reducing IP's EPS & Target

Investment ConclusionWe view IP's 1Q results to be respectable againstthe backdrop of a challenging environment(seasonally weak volumes, heavy maintenanceexpense, fiber shortages, high input costs, etc).However, we are modestly reducing our EPSestimates and we are reducing our target from $24to $23. Although we recently shifted our stance onIP's core containerboard business from negative toneutral, we are nonetheless disappointed on theprogress of announced price hikes. We maintaina 3-UW rating on shares of IP.

Summary On a cautious note, we are reducing our

2010/2011/2012 EPS estimates for IP from$1.40/$1.55/$1.70, to $1.25/$1.40/$1.50.

On a more positive note, it is difficult to envisionwhy IP's 2H results would not be significantlyhigher than 1H results (we estimate 2H EPS of$0.79 vs. 1H EPS of $0.46). 2H results should behelped by flat to higher prices for corrugatedboxes, generally higher volumes, lowermaintenance expense, and lower input costs forvirgin and recycled fiber. We estimate this will beoffset by significant downward pressure on pulpprices which, at a minimum, would keep a lid onuncoated free sheet prices.

Peter Ruschme1.212.526.98

peter.ruschmeier@barcap.c

BCI, New Y

United States of Amer

Basic Industr

Paper & Forest Produc

Reuters IP

Bloomberg IP

ADR

EPS (US$) (FY Dec)

2009 2010 2011 % Change

Actual Old New St. Est. Old New St. Est. 2010 20111Q 0.08A 0.07E 0.04A 0.04E N/A N/A N/A -50% N/A2Q 0.20A 0.46E 0.42E 0.37E N/A N/A N/A 110% N/A3Q 0.37A 0.50E 0.46E 0.63E N/A N/A N/A 24% N/A4Q 0.24A 0.37E 0.33E 0.57E N/A N/A N/A 38% N/A

Year 0.89A 1.40E 1.25E 1.60E 1.55E 1.40E 2.19E 40% 12%

P/E 21.4 19.1

Market Data

Market Cap (Mil.) 11863

Dividend Yield 0.44

52 Week Range 29.25 - 10.18

Financial Summary

Revenue TTM (Mil.) 23366

Stock Overview

International Paper - 05/ 03/ 2010

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Source: Barclays Capital Live

12

16

20

24

28

Volume

5M

15M

Stock Rating Target Price

New: 3-Underweight New: US$ 23.00

Old: 3-Underweight Old: US$ 24.00

Sector View: 1-Positive

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price hike and none of the April price hike. Nonetheless, even if the second round of box price hikes fails as we expect, IPs P&L shouldimprove sharply during 2010 2H as virgin fiber and recycled fiber costs decline, maintenance cost is reduced, and volumes pick upmodestly.

1Q sales of $5.807 BB were 2.1% below our $5.934 BB estimate, with shortfalls in Printing Papers and Distribution more than offsettingstronger-than-expected Consumer Packaging sales. Net debt of $7.206 BB was $294 MM above our expectation.

Looking forward, CEO John Faraci noted that costs and fiber availability have improved in 2Q relative to 1Q and indicated that IP has beeable to continue to realize the effects of its price increases announced during 1Q. Combined, these factors are expected to lead to a"significantly better second quarter." We certainly agree with this assessment.

Relative to our expectations, the negative $0.03 variance in reported results breaks down as follows:

Barclays Capital 1Q Estimate $0.07 per share

Consumer Packaging ($0.03)/shareIndustrial Packaging ($0.01)/shareDistribution ($0.01)/share

Printing Papers +$0.01/share

Rounding Items +$0.01/share

IP 1Q Actual $0.04 per share

Source: Company reports and Barclays Capital estimates.

Key Takeaways:

Input Cost Inflation and Maintenance Outages. During 1Q, input cost inflation resulted in a $0.26/share drag relative to 4Q and

maintenance outages resulted in an additional $0.06 drag. IPs initial estimate for input costs in 1Q was $120 MM higher than

4Q09, but costs came in $144 MM higher sequentially. The two primary costs that increased were virgin fiber (up $60 MM) and

OCC (up $55 MM). These costs peaked in the March and have declined during April, with OCC and softwood fiber down more

substantially than hardwood pulpwood. Even so, management expects input costs during 2Q to be similar to 1Q - even if fiber

costs decline during 2Q as expected, they ended 1Q at a higher level than the 1Q average. Given that costs are expected to

moderate, OCC and fiber costs at the end of 2Q are likely to be lower than at the end of 1Q, and lower than the 2Q average. Th

sets the stage for better margins in 3Q and 4Q. On the maintenance side, IP expects to have taken 2/3 of its annual outages by

the end of 2Q. Thus, the second half of the year should have a smaller drag from outages than 1H.

SCA acquisition. IP announced on April 26, 2010 that it agreed to purchase SCAs Asian box business for slightly under $200

MM. The purchase price is approximately 8 times 2009 Ebitda and 6 times IPs estimate for 2010 Ebitda. The acquisition is

expected to triple the size of IPs sales of corrugating boxes in Asia.

Company Guidance. For 2010, IP continues to expect capital spending to be roughly $800 MM and D&A to be $1.45 BB

(excluding Ilim and special items). IP expects its 2010 effective tax rate (ex special items) will be in the range of 30-32%. Full yea

net interest expense is expected to be $600 MM to $625 MM, below its previous range of $620 MM - $640 MM. Corporate items

are expected to be $200 MM - $225 MM.

Segment Review:

Printing Papers Review: The Printing Papers segment reported operating income of $126 MM (ex items) in 1Q vs. $101 MM last year a

$139 MM in 4Q09. Results were $8 MM above our $118 MM estimate. During the quarter, IPs North American volumes dropped 4%

sequentially and increased 2% year over year, while paper prices increased $23/ton sequentially and dropped $49/ton year over year. NoAmerican pulp prices were up $83/ton sequentially and $94/ton vs. 1Q09. Maintenance expense for the quarter was $27 MM. IP expects

maintenance expense of $64 MM in 2Q, $33 MM in 3Q, and $52 MM in 4Q. Our preliminary 2Q estimate calls for operating income of $17

MM vs. operating income of $86 MM in 2Q09 and $126 MM during 1Q10.

Industrial Packaging Review: The Industrial Packaging segment reported operating income of $46 MM (ex items) in 1Q vs. operating

income of $188 MM last year and operating income of $84 MM in 4Q09. Results were $5 MM below our $51 MM estimate. Management

estimates that weather-related and wood-related issues in January and February negatively impacted segment earnings by approximately

$15 MM. North American container volumes were up 2% sequentially and year over year, while prices were up $1/ton sequentially and

down $74/ton year over year. We are disappointed prices were not higher, although part of this likely relates to mix. European volumes

were up 1% sequentially and down 4% year over year, but prices were up 7 EUR/ton sequentially and down 53 EUR/ton year over year.

Our preliminary 2Q10 estimate calls for operating income of $217 MM vs. operating income of $255 MM in 2Q09 and $46 MM during 1Q.

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Consumer Packaging Review. The Consumer Packaging segment reported operating income of $31 MM (ex items) in 1Q vs. operating

income of $22 MM last year and operating income of $49 MM in 4Q09. Results were $18 MM below our $49 MM estimate. Volumes for U

Coated Paperboard increased 10% sequentially and 19% year over year while prices decreased $3/ton sequentially and $44/ton compare

with last year. Our preliminary estimate calls for operating income of $60 MM for 2Q10, vs. operating income of $38 MM in 2Q09 and $31

MM during 1Q.

Distribution. The Distribution segment reported operating income of $21 MM in 1Q vs. an operating loss of $7 MM last year and operatinincome of $31 MM in 4Q09. Results were $6 MM below our $27 MM estimate. Our preliminary 2Q10 estimate calls for operating income o

$24 MM vs. operating income of $10 MM in 2Q09 and operating income of $21 MM during 1Q.

Forest Products. The Forest Products segment reported operating income of $8 MM in 1Q vs. operating income of $2 MM last year andoperating income of $18 MM in 4Q09. Results were $3 MM above our estimate of $5 MM. During 4Q, IP sold 3,300 acres for an averageprice of $2,418/acre. At the end of the quarter, IP had ~200k acres in its land portfolio with an estimated value of $225-250 MM. Profits inthis segment continue to be driven by asset sales which will eventually be exhausted. Our preliminary 2Q10 estimate calls for operatingincome of $9 MM, vs. operating income of $3 MM in 2Q09 and $8 MM during 1Q.

Valuation Methodology

Our current 12-month price target of $23 represents a 7.0x multiple on estimated mid-cycle adjusted EBITDA of $2.753 BB, less adjusted

net debt of $9.508 BB, divided by 428.8 MM shares. Adjusted net debt includes the following: 4Q reported net debt of $7.206 BB, plus

$2.706 BB underfunded pension liability, plus $491 MM OPEB liability, less $895 MM for the tax deductibility of the pension contribution.

Our prior 12-month price target of $24 represents a 7.3x multiple on estimated mid-cycle adjusted EBITDA of $2.753 BB, less adjusted ne

debt of $9.770 BB, divided by 426.7 MM shares. Adjusted net debt includes the following: 4Q reported net debt of $7.141 BB, plus $2.706

BB underfunded pension liability, plus $491 MM OPEB liability, less $895 MM for the tax deductibility of the pension contribution, plus $32

MM of other debt.

Analyst Certification:

I, Peter Ruschmeier, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or a

of the subject securities or issuers referred to in this research report and (2) no part of my compensation was, is or will be directly or

indirectly related to the specific recommendations or views expressed in this research report.

Other Team Members:Lee, Kenneth (BCI, New York) 1.212.526.1291 kenneth.lee1@barcap.com

Mallela, Chethan (BCI, New York) 1.212.526.1191 chethan.mallela@barcap.com

Company Description:

IP, headquartered in Stamford, CT, is the world's largest paper and forest products company. IP produces and distributes printing paper,containerboard, consumer packaging, bleached board, building products, and market pulp.

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On September 20, 2008, Barclays Capital acquired Lehman Brothers' North American investment banking, capital markets, and private investmenmanagement businesses. All ratings and price targets prior to this date relate to coverage under Lehman Brothers Inc.

Important Disclosures:

International Paper (IP) US$ 26.74 (29-Apr-2010) 3-Underweight / 1-Positi

Rating and Price Target Chart:

4-07 7-07 10-07 1-08 4-08 7-08 10-08 1-09 4-09 7-09 10-09 1-10 4-10

4.00

8.00

12.00

16.00

20.00

24.00

28.00

32.00

36.00

40.00

44.00

Source: FactSet

INTERNATIONAL PAPER CO.As of 27-Apr-2010

Currency = USD

Closing Price Price TargetRecommendation Change Drop Coverage

Currency=US$Date Closing Price Rating Price Target29-Oct-09 23.24 20.0020-Oct-09 24.36 18.0003-Aug-09 19.08 12.0001-May-09 13.04 9.0030-Jan-09 9.12 3 -Underweight30-Jan-09 9.12 7.0026-Jan-09 10.73 10.0031-Oct-08 17.26 18.0021-Oct-08 18.46 20.0004-Sep-08 27.43 33.0001-Aug-08 28.52 31.00

Date Closing Price Rating Price Targe18-Jul-08 23.38 27.001-May-08 26.20 32.018-Apr-08 28.65 33.008-Feb-08 31.84 39.023-Jan-08 30.95 38.016-Oct-07 34.92 43.003-Aug-07 34.86 41.016-Jul-07 40.01 43.004-May-07 38.10 41.020-Apr-07 37.20 40.0

FOR EXPLANATIONS OF RATINGS REFER TO THE STOCK RATING KEYS LOCATED ON THE PAGE FOLLOWING THE LAST PRICE CHART.

Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by International Paper or one of itsaffiliates.Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from International Paper in the past 12months.Barclays Bank PLC and/or an affiliate trades regularly in the shares of International Paper.Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from International Paper within the past12 months.International Paper is or during the past 12 months has been an investment banking client of Barclays Bank PLC and/or an affiliate.International Paper is or during the last 12 months has been a non-investment banking client (securities related services) of Barclays BankPLC and/or an affiliate.Barclays Bank PLC is associated with specialist firm Barclays Capital Market Makers, which makes a market in International Paper stock. any given time, the associated specialist may have "long" or "short" inventory position in the stock; and the associated specialist may be othe opposite side of orders executed on the Floor of the Exchange in the stock.

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Valuation Methodology: Our current 12-month price target of $23 represents a 7.0x multiple on estimated mid-cycle adjusted EBITDA of$2.753 BB, less adjusted net debt of $9.508 BB, divided by 428.8 MM shares. Adjusted net debt includes the following: 4Q reported netdebt of $7.206 BB, plus $2.706 BB underfunded pension liability, plus $491 MM OPEB liability, less $895 MM for the tax deductibility of thepension contribution.

Risks Which May Impede the Achievement of the Price Target: Market risks include exposure to uncoated free sheet, containerboard,and pulp markets; availability and cost of raw materials including wastepaper; changes in energy costs; and interest rate sensitivity.

Currency risk associated with changes in foreign exchange rates and trade regimes related to company's operations in Russia, Brazil, andEurope.

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Important Disclosures Continued:The analysts responsible for preparing this report have received compensation based upon various factors including the firm's totalrevenues, a portion of which is generated by investment banking activities.

Company Name Ticker Price Price Date Stock / Sector Rating

International Paper IP US$ 26.74 29-Apr-2010 3-Underweight / 1-Positive

Barclays Capital produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative

analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other typeof research products, whether as a result of differing time horizons, methodologies, or otherwise.

Guide to the Barclays Capital Fundamental Equity Research Rating System:Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2-Equal Weight or 3-Underweight (seedefinitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industrysector (the sector coverage universe). Below is the list of companies that constitute the sector coverage universe:

International Paper (IP) Louisiana-Pacific Corp. (LPX)MeadWestvaco (MWV) Plum Creek Timber (PCL)Rayonier Inc. (RYN) Sappi Ltd. (SPP)Temple-Inland Inc. (TIN) Weyerhaeuser Co. (WY)

In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or

3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system.Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone

Stock Rating1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-montinvestment horizon.2-Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over 12- month investment horizon.3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a12- month investment horizon.RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverageimpracticable or to comply with applicable regulations and/or firm policies in certain circumstances including when Barclays Capital is actin

in an advisory capacity in a merger or strategic transaction involving the company.

Sector View1-Positive - sector coverage universe fundamentals/valuations are improving.2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.3-Negative - sector coverage universe fundamentals/valuations are deteriorating.

Distribution of Ratings:Barclays Capital Equity Research has 1456 companies under coverage.42% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 47%of companies with this rating are investment banking clients of the Firm.45% have been assigned a 2-Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating;42% of companies with this rating are investment banking clients of the Firm.11% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 32of companies with this rating are investment banking clients of the Firm.

Barclays Capital offices involved in the production of Equity Research:

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LondonBarclays Capital, the investment banking division of Barclays Bank PLC (Barclays Capital, London)

New YorkBarclays Capital Inc. (BCI, New York)

Tokyo

Barclays Capital Japan Limited (BCJL, Tokyo)So PauloBanco Barclays S.A. (BBSA, So Paulo)

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