UPDATE 1-IP profit beats as sales inch higher in U.S., Europe

(Adds stock, earnings comparison, CEO quote)

July 29 (Reuters) - International Paper Co, the largest corrugated box maker in North America, posted a higher-than-expected profit on Tuesday, citing slowly returning demand in the United States and Europe.

For the second quarter, the company posted net income of $161 million, or 37 cents per share, compared with $259 million, or 57 cents per share, a year earlier.

Excluding a charge to repay debt early, a charge to close an Alabama paper mill and other one-time items, earnings were 95 cents per share.

By that measure, analysts expected a profit of 83 cents per share, according to Thomson Reuters I/B/E/S.

Revenue fell to $7.21 billion from $7.34 billion. Analysts expected $7.35 billion.

"I remain pretty bullish that the U.S. economy can grow 3 to 4 percent a year, but it's still not reaching its potential," IP Chief Executive Officer John Faraci said in an interview. "There just seems to be one slow step at a time."

Shares of IP have gained nearly 2 percent so far this year, closing Monday at $49.97.

(Reporting by Ernest Scheyder; Editing by Bernadette Baum and Lisa Von Ahn)