Monthly Archives: February 2016
WebMD: Zacks’ Bull of the Day Play
WebMD (WBMD – Snapshot Report) is a $2 billion provider of online health information services to consumers, physicians, employers, health plans, and other healthcare professionals. The company connects with its customers through both public and private portals.
Through its public portals consisting of desktop and mobile offerings, the company provides personalized online healthcare information to consumers on its flagship site, WebMD.com. Revenue is generated primarily through advertisements and sponsorship agreements from pharmaceutical and health and wellness companies.
Through its private portals, like Medscape.com, WebMD offers health management applications for employers and health plans, and generates revenue typically on a per participant basis.
The Trifecta: Sales Beat, EPS Beat, Guidance Raised
Last week, WebMD reported 4Q15 results above expectations and provided strong guidance that compelled analysts to raise earnings estimates and price targets.
Management guided 2016 revenue, adjusted EBITDA and EPS above the Street as they are seeing strong ad demand from biopharma and are realizing operating leverage. The expected acceleration of biopharma ad revenue growth to 15% was what impressed analysts the most as it confirms the shift in pharma ad spend from traditional print and TV (offline) to online where WebMD has a leading position in this market.
My colleague Jeremy Mullin wrote about WebMD after earnings, picking the stock among 4 Internet Stocks to Buy Now. Here’s what he had to say…
WebMD sports a Zacks Style Score of “B” in growth, but “D” in value. Because this valuation is in question short sellers have piled in with 19% of the stock short, giving the company a 7.5 short ratio and short squeeze potential. The company’s valuation is something investors have questioned in the past and exceeding earrings expectations is a catalyst for the stock price.
On February 23rd the company reported Q4 earnings of $0.60 a share versus the $0.57 expected. Revenue came in slightly higher for the quarter at $192 Million versus the $191 expected. In addition, the company went on to guide fiscal year 2016 revenue $685-705 Million versus $694 Million. Traffic on the website reached 201 million unique users per month, generating almost 4 billion page views for the quarter, increases of 6% and 7% from the prior year period.
The stock surged almost 5% higher after the numbers. It looks poised to take out all time highs above $60.
The earnings beat isn’t much of a surprise as this makes its fifth EPS upside surprise in a row.
(end of Mullin excerpt on WBMD)
Where is WBMD Going? Follow the Estimates
While the Zacks Rank is a short-term timing model based on the recent direction and magnitude of analyst Earnings Estimate Revisions (EER), what you’ll notice if you track changes in the Rank quarter after quarter is that some stocks keep showing up as Zacks #1 and #2 Rank stocks.
Those are the names that continue to impress Wall Street with the quarterly trifecta of top and bottom line beats and raised guidance. While WBMD’s beats were not spectacular, they have been consistent and steady.
Here’s the proprietary Zacks Price & Consensus chart that shows how stock price often tracks the momentum in annual estimates…
If you want to capitalize on the strong trends in healthcare information management and advertising, WebMD is the stock to watch.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money (FTM) portfolio.
Alliance Fiber Optic Products: Zacks’Bear of the Day Play
Alliance Fiber Optic Products (AFOP – Snapshot Report) recently reported earnings and missed the Zacks Consensus Estimate as well as the Wall Street Consensus Estimate. The stocks has slipped to a Zacks Rank #5 (Strong Sell) and today it is the Bear of the Day.The Numbers
AFOP missed the Zacks Consensus Estimate of $0.23 by $0.16 for a 78% negative earnings surprise. Revenues came in a little below expectations at $16 million for an 11% negative revenue surprise.
Description
Alliance Fiber Optic Products makes and sells various fiber optic components and integrated modules for communications equipment manufacturers and service providers. The company is widely reported as having a deal with Google to help Google Fiber reach consumers. Alliance Fiber Optic Products was founded in 1995 and is headquartered in Sunnyvale, California.
Earnings History
The recent earnings history for AFOP is rather weak with five of the last six reports coming below the Zacks Consensus Estimate. The last three reports were misses, with negative earnings surprises of 78%, 44% and 3% respectively.
Estimates
The 2016 Zacks Consensus estimate has been moving lower. The number stood at $1.40 in September of last year, but slipped to $1.14 in October. It has since fallen to $1.09.
There are no estimates at the current time for 2017.
Chart
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #5 (Strong Sell) we see that estimates are moving higher.
Follow Brian Bolan on twitter at @BBolan1
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.
Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.
Intersil: Zacks’ Bull of the Day Play
Intersil Corp (ISIL – Snapshot Report) recently reported earnings and beat the Zacks Consensus Estimate as well as the Wall Street Consensus Estimate. As a result the stock rallied for just about 7% in the session following the report. The stock is a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.The Numbers
ISIL beat the Zacks Consensus Estimate of $0.10 by $0.07 for a 70% positive earnings surprise. Revenues came in mostly in line with expectations, but the Zacks Research System shows it as a miss of approximately $1M.
ISIL guided to Q1 revenues to a range of $125M -$131M when the consensus was calling for revenue of $127M.
Description
Intersil Corp makes power management and precision analog integrated circuits (ICs). The company offers various power IC solutions for battery management, processor power management, and display power management, including power regulators, converters, and controllers, as well as integrated power modules. Intersil Corporation was founded in 1967 and is headquartered in Milpitas, California.
Earnings History
The recent earnings history for ISIL is rather solid with four of the last seven reports topping the Zacks Consensus Estimate. The last two reports were beats as well, so there is some solid earnings momentum here too.
The recent beat of 70% is one of the bigger beats, as the company has posted positive earnings surprises of between 7% and 25% throughout the last seven quarters.
Estimates
The 2016 Zacks Consensus estimate has been moving higher. The number stood at $0.50 in December of last year and then kicked higher to $0.52 in January. By February, that estimate increased again to $0.55.
The 2017 numbers have little visibility to them at this point. In fact there are only two months worth of estimates, so looking at them moving from $0.63 to $0.64 from January to February doesn’t really tell us that much. What we do see from this is that there is implied earnings growth of 17%.
Valuation
ISIL has a mixed valuation. Most investors immediately look to PE to discern value and at 22x forward earnings ISIL doesn’t offer much “value” as the stock trades at a premium to the industry average of 15x forward earnings. Value investors also tend to focus on Price to Book, where ISIL trades at 1.7x compared the a 2.2x industry average, so it trades at a discount on that measure. When one looks at price to sales, we see a 3.2x multiple for ISIL and a 2.1x industry average so there is a small premium there too. Now you understand why I labeled this valuation as mixed.
Chart
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.
Follow Brian Bolan on twitter at @BBolan1
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.
Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.
HSBC: Zacks’ Bear of the Day Play
It’s tough to be a fan of foreign banks right now. And being bearish right now you run the risk of being the last guy in the door. The truth is, if you were bearish on foreign banks six months ago, very little has changed in the fundamentals to change that view. If you’re talking about banks with European or Chinese exposure, I’d argue that the fundamentals have gotten worse, not better. Deteriorating credit conditions and the prevalence of bad loans on the books to go along with negative rates in places like Europe aren’t exactly perfect conditions for the banking business.
That’s why I’m still looking for further downside on today’s “Bear of the Day” HSBC Holdings (HSBC – Analyst Report). HSBC Holdings plc provides banking and financial products and services. It operates through four businesses Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking. The company operates through approximately 6,100 offices in Europe, Asia, the Middle East, North Africa, North America, and Latin America.
Analysts have dropped their current year earnings estimates over the last 30 days. The bearish sentiment has seen our Zacks Consensus Estimate drop from $4.15 to $3.87. A big reason for the concern is HSBC’s exposure to Asia. About 40% of HSBC’s loan portfolio is derived from Asia. Asia’s general link to commodity prices are worrying an investor base here as the currency headwind has gone from strong to stronger over the last several weeks.
HSBC is also headquartered in London and does a ton of business in Europe. Any concern over a “Brexit” or continuing troubles in the Euro area could negatively impact the stock. I want to make something perfectly clear here. I understand I’m giving a bearish outlook on HSBC stock here but I am not implying anything negative about their solvency or the strength of their balance sheet. All indications point to HSBC being in a strong financial position with capital ratios that are inline to meet future and current regulatory levels.
Their full-year EPS was just reported below expectations on lower revenue and higher loan losses. This trend should be disturbing to shareholders, although HSBC did a good job of smoothing this out by upping their special once a year dividend to $1.05 from last year’s $1.00.
If you’re looking for a way to play the foreign banks industry you should check out Zacks Rank #2 (Buy) stocks Banco Macro (BMA – Snapshot Report) and Erste Group Bank (EBKDY – Snapshot Report).
Fabrinet: Zacks’ Bull of the Day Play
Too often I hear people that call stock market investing like going to a big casino. As if none of this analysis matters and it’s all just a big crap shoot. To be perfectly honest with you, hearing things like that really upsets me. Maybe I’m too sensitive, but throwing that blanket excuse on everything cheapens what I do for a living and shows just how ignorant people can be.
There sure are parallels to the casino and gambling though. One famous saying I like to use is that “You bet the jockey, not the horse.” I haven’t made much money betting on ponies but I’ve done alright in the stock market. If you can apply this horse racing gem to the market, you’ll see that this is much more than some giant casino for rich people.
Applied to the stock market, betting the jockey means betting on the person running a company. It’s why stocks like Solar City (SCTY – Snapshot Report) do well since people love to bet the jockey, putting their money on Elon Musk. Today’s Bull of the Day Fabrinet (FN – Snapshot Report) has another famous jockey you should be betting on, Tom Wheeler.
Wheeler was a cofounder of Seagate Technologies (STX – Analyst Report) and founded Fabrinet in 2000. The company acquired manufacturing assets in Thailand from Seagate and began providing manufacturing services to the optical component industry.
Last quarter, the company reported revenue of $233 million, above the $218 million to $222 million guidance range. EPS came in at 50 cents, well ahead of consensus calling for 46 cents. The company also guided next quarter EPS to 53 cents.
Analysts have increased their bullish bets following up on earnings. Three analysts have jacked up their estimates for the current quarter, next quarter and current year. The bullish revisions for the current quarter have our Zacks Consensus Estimate rising from 40 cents to 54 cents. The current year numbers have jumped from $1.65 to $1.85. These numbers are big reason for the Zacks Rank # 1 (Strong Buy).
You can see the huge jump on the earnings report that took shares from near $25 to over $28. The buying stalled out just below $30 as an overcooked CCI shot up to 300. Over the last few days shares have retreated to support as the overbought CCI has cooled a bit. The 20-day moving average sits down at $27.21 providing downside support. Adding here with a short just below the bottom end of the earnings gap gives a nice risk versus reward scenario.
Nordstrom: Zacks’ Bear of the Day Play
Nordstrom (JWN – Analyst Report) just reported earnings and missed the Zacks Consensus Estimate as well as the Wall Street Consensus Estimate. The stocks has slipped to a Zacks Rank #5 (Strong Sell) and today it is the Bear of the Day.The Numbers
JWN missed the Zacks Consensus Estimate of $1.17 by $0.05 for a 4.1% negative earnings surprise. Revenues came in a little below expectations at $4.143 billion for a 1.9% negative revenue surprise.
JWN guided to FY17 EPS to a range of $3.10-3.35 and at the time of the earnings report the Zacks Consensus Estimate was calling for $3.51.
Description
Nordstrom is a fashion specialty retailer. As of February 11, 2016, the company operated 323 stores in 39 states. The company was founded in 1901 and is based in Seattle, Washington.
Earnings History
The recent earnings history for JWN is rather weak with four of the last five reports coming below the Zacks Consensus Estimate. The last two reports were misses, with negative earnings surprises of 19% and 4% respectively.
Estimates
The FY2017 Zacks Consensus estimate has been moving lower. The number stood at $3.51 just prior to the most recent earnings miss and is now down to $3.21.
The FY 2018 number also saw a corresponding drop from $3.79 to $3.57 following the miss.
Valuation
JWN trades at a discount to the industry average in terms of forward PE (15.3x vs 22.5) and price to sales (0.6x vs 1.7x). It trades at a wild premium in terms of price to book at 10.4x compared to 5.8x.
Fiscal 2017 is expected to see revenue growth of 4.1%, but that is below the 5.2% industry average. EPS is expected to contract in FY 2017 by 3.7% while the industry average is expected to increase by 9.3%.
Chart
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #5 (Strong Sell) we see that estimates are moving higher.
Follow Brian Bolan on twitter at @BBolan1
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.
Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.
Dean Foods: Zacks’ Bull of the Day Play
Dean Foods (DF – Analyst Report) just reported earnings and beat the Zacks Consensus Estimate as well as the Wall Street Consensus Estimate. Despite that beat, shares of the dairy producer were lower by about 7% intra-day. Before the beat, the stock was a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.The Numbers
DF beat the Zacks Consensus Estimate of $0.34 by $0.02 for a 5.8% positive earnings surprise. Revenues came in a little below expectations at $2.023 billion for a 2.6% negative revenue surprise.
DF guided to Q1 non-GAAP EPS of $0.32-0.42 and the mid-point is well above market expectations.
Total volume across all products was 658M gallons in Q4, a 3.6% year over year decline. Raw milk costs in 4Q averaged $16.34 per hundred-weight, a 0.2% sequential decrease from Q3 and a decrease of 31% year over year.
Description
Dean Foods is a food and beverage company that processes and distributes milk, and other dairy products. Dean Foods Company was founded in 1925 and is headquartered in Dallas, Texas.
Earnings History
The recent earnings history for DF is rather solid with five of the last six reports topping the Zacks Consensus Estimate. The last four reports were all beats as well, so there is some solid earnings momentum here too.
The recent beat of 5.8% is one of the smaller beats, as the company has posted positive earnings surprises of between 20% and 77% throughout the last six quarters.
The topline, however, has been a little more challenged. The company has not topped the Zacks Consensus Estimate since the September 2014 quarter when they posted a beat of $16M or 0.7% ahead of expectations.
Estimates
The 2016 Zacks Consensus estimate has been moving higher. The number stood at $1.03 in October of last year and then jumped to $1.23 in November following strong earnings. By January, that estimate was shaved by a penny to $1.22, but just before earnings the estimate grew to $1.25.
Given that the company guided well above expectations, we could see estimates continue to move higher for 2016.
The 2017 numbers have little visibility to them at this point. They more or less were a mirror reflection to the 2016 numbers and show minimal earnings growth.
The Best Defense
The stock market has been rather weak early in 2016. One secret savvy investors have learned over the years is that in times of trouble, its best to play defense. This means that sectors of the market that are the opposite of the high fliers will attract more capital as investor look to stay invested, albeit in much safer plays.
Recent solid earnings in the food sector have come from Hormel (HRL – Analyst Report) Tyson (TSN – Analyst Report) and even Hain Celestial (HAIN – Analyst Report). These stocks have all seen their share prices move up in what we call the post earnings drifts higher.
It should also be noted that WhiteWave Foods (WWAV – Snapshot Report) which also recent beat earnings estimates is a spin off from DF. The company still owns about 20% of WhiteWave.
Valuation
After a few years of declining revenues, DF is set to see revenues increase in 2016. Earnings growth of about 3% in 2015 was nice, but well below the 12% growth for the industry average. These are two reasons why DF trades at a discount to the industry average in terms of forward PE. The 16.4x multiple for DF is well below the 19.1x industry average. Another metric showing the stock trading at a discount is the price to sales, with DF at 0.2x while the industry average is looking at 1.4x.
Chart
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.
Follow Brian Bolan on twitter at @BBolan1
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.
Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.
Bed Bath and Beyond: Zacks’ Bear of the Day Play
While gasoline prices have fallen to levels unseen in years, many retail companies haven’t benefited. Instead, it has been restaurants and airlines that have been the biggest winners, leaving home good stores like Bed Bath & Beyond (BBBY – Analyst Report) in the dust.
Shares of BBBY have lost about a quarter of their value in the past six months and there definitely could be more pain ahead for this stock. After all, if they haven’t been able to drive fresh traffic as consumers have more money in their pockets or with their incredible barrage of 20% of coupons, why should we expect anything different in 2016?
Analyst Opinion
Analysts certainly seem to agree with this assessment as we have seen them almost universally slash EPS estimates for the stock. In fact, over the past sixty days we have seen just one estimate go higher for the current quarter compared to 12 lower in the same time frame. Meanwhile, there hasn’t been a single positive earnings estimate revision for the current year or next year periods in the past sixty days compared to 13 lower for each time frame.
Clearly, analysts are in agreement over BBBY’s continued troubles in both the near term and longer out too. And it isn’t like analysts are just reducing estimates by a cent or two, as there have been some serious cuts to expectations as of late. This includes declines in the consensus estimate in excess of 6% for the current quarter and the following year, and a nearly four percent decline in the consensus for the full year.
Growth Rates Also Poor
This is pushing growth rates for BBBY down to flat levels, as year-over-year the company is expected to see EPS move higher by just 0.2% this quarter. The full year figures are actually worse, with an earnings contraction of -0.7% projected for the company in the time frame.
Cash flow growth is also negative and below the industry, while the projected sales growth comes in at just 1.66% for the year. No wonder BBBY has earned itself a Growth Score of ‘D’, putting it into poor company from this look.
Bottom Line
Given these metrics, it shouldn’t be too surprising that BBBY has earned itself a Zacks Rank #5 (Strong Sell) and that we are looking for more underperformance from this security in the near future. A Rank of #5 actually puts the security in the bottom 5% overall, so there are definitely better selections out there for investors right now.
Speaking of better picks, there are actually several promising securities in the retail industry that are worth a look right now. One worthy of closer inspection is Build-A-Bear Workshop (BBW – Snapshot Report), a stock with a Zacks Rank #2 (Buy) and a growth score grade of ‘B’.
However, there are several other quality names in this area of the retail market, including a few with top ranks. Either way, they are all probably better picks than BBBY right now, at least until analysts come around and the company can show some growth prospects as well.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
SolarEdge Technologies: Zacks’Bull of the Day Play
With low oil prices expected well into the future, many were pretty bearish on companies in the broader solar industry. After all, with lower oil prices and less demand for energy in general, the thinking was that solar wouldn’t be able to compete in this environment, much like in previous downturns of oil.
But thanks to more efficient companies and changing attitudes by consumers, the near-term future look may finally be bright for many solar companies. In fact, after a big drop in late 2015 and early 2016, the industry currently has a top 10% industry rank and not a single company has a rank worse than ‘hold’ right now.
But which is the best company to watch in this market right now? Well, arguably, SolarEdge (SEDG – Snapshot Report) is worth a closer look as the security has some real promise to be one of the top picks in the space for 2016.
SEDG in Focus
SEDG is an Israeli company in the solar business, providing monitoring and optimizing solutions for solar panels. A main focus of the company is its ‘StorEdge’ products which help with providing backup power solutions and monitoring capabilities, while the company also has a partnership with Tesla and their home battery project, the Powerwall, too.
This focus on improvement instead of building panels has been a winning strategy for SEDG as the company has easily outperformed the solar industry at large, represented by the Guggenheim Solar ETF (TAN – ETF report) over the past year. SEDG has also beaten out TAN on a YTD look too, making for a compelling pick as the top choice in this space going forward.
Analyst Opinion
Analysts who follow the company appear to agree with this assessment, as they have been raising their earnings estimates for SolarEdge stock lately. In fact, not a single estimate for SEDG stock has gone lower in the past sixty days for any of the time frames that we study, while three have gone higher for the current quarter and the current year.
The magnitude of these estimate increases has also been impressive, as analysts are now baking in great growth rates for the stock. Recent revisions have bumped up this quarter’s growth (year-over-year) to 84%, while we see 106% growth expected for the current year.
But before you start to worry about SolarEdge living up to these lofty expectations, consider its recent performance in earnings season. The company has beaten estimates by an average of 68% in the last four quarters, including a 171% beat!
Given these figures and its avoidance of the panel side of the business, hopefully investors can see this is a great choice in the solar market. No wonder we currently have a Zacks Rank #1 (Strong Buy) rating on the stock right now.
Bottom Line
Many investors might be pessimistic about solar given low energy prices. However, stocks here have arguably bottomed out and some nice values are starting to develop as analysts raise their earnings estimates.
One overlooked route to go is definitely with SolarEdge, the only top ranked stock in the sector right now. The security has great growth rates and it focuses on a unique part of the solar business– instead of panels– making it a very intriguing play for investors searching to play this segment in one of the best ways possible.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Bull & Bear of the Day 
Some companies have a bad day or two, but some get hit from all sides. One such company saw a mill shut down due to labor issues, lower tonnage prices, restarting plant issues (after the strike was over), lower productivity from another plant, and a big spike in one of their major input costs. That is why KapStone Paper and Packaging Corp (KS – Snapshot Report) is the Zacks Bear of the Day.
This Zacks Ranked #5 (Strong Sell) company was formed to effect a business combination with a suitable operating business in the paper, packaging, forest products and related industries. Headquartered in Northbrook, IL, KapStone Paper and Packaging Corporation is a leading North American producer of kraft paper and inflatable dunnage bags. The Company is the parent corporation of KapStone Kraft Paper Corporation which includes a paper mill in Roanoke Rapids, NC, and RideRite, an inflatable dunnage bag manufacturer in Fordyce, AR.
In their most recent earnings report, the company saw quarterly declines in Net Income (-65%), Diluted EPS (-66%), Adjusted EBITDA (-20%), Adjusted Net Income (-60%), and Adjusted Diluted EPS (-59%). The company also saw yearly declines in Net Income (-38%), Diluted EPS (-38%), Adjusted EBITDA (-11%), Adjusted Net Income (-28%), and Adjusted diluted EPS (-27%). This indicates that their earnings issues are not just in the most recent quarter, but have been around for the past 4 quarters.
According to Roger Stone, Chairman and CEO, “Fourth quarter was particularly disappointing due primarily to December’s results. Seasonally weaker demand resulted in an eight-day market shutdown at our Longview mill and box plant, and product mix deteriorated. Our results were further negatively impacted by poor start-ups after Longview’s outage and at Charleston after completion of a machine upgrade. Together, the market and maintenance downtimes resulted in a loss of 41,000 tons in the fourth quarter with an estimated EBITDA impact of $10 to $12 million. Although operationally our Charleston mill weathered the 1,000-year storm very well, fiber prices in the region soared but are expected to gradually be reduced as the region dries out.”
As you can see from the graph below, actual performance and estimated future performance has been declining for the past year.
Declining Estimates
After KapStone’s recent earnings report, estimates for Q1 16, Q2 16, FY 16, and FY 17 have all seen significant negative adjustments over the past 30 days; Q1 16 fell from $0.38 to $0.26, Q2 16 dropped from $0.52 to $0.37, FY 16 plummeted from $1.92 to $1.29, and FY 17 dipped from $2.25 to $1.48.
Bottom Line
This company is the smallest publically traded containerboard producer, which helps when the economy is running well, but it is a big negative when the economy is stuck in the mud. Further, with increased input costs, and declining tonnage returns, their margins will see pressure in the near term.
So, if you are inclined to invest in the Paper and Related Products segment, you would be best served to look into Sappi Limited (SPPJY – Snapshot Report), and or UPM-Kymmene OYJ (UPMKY – Snapshot Report). Both currently carry a Zacks Rank of #2 (Buy).
Note: Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
Get the latest research report on UPMKY – FREE
Get the latest research report on SPPJY – FREE
Get the latest research report on KS – FREE