Clearwater (CLW) To Trim Operations On Continued Headwinds

Over the past 90 days, Clearwater Paper Corporation (NYSE:CLW) has grossly underperformed the Zacks categorized Paper & Paper Products industry due to continued macroeconomic headwinds. This Zacks Rank #5 (Strong Sell) has an average return of 1.9% for the last 90 days compared with 8.2% for the industry. It appears to be grappling with numerous challenges that are likely to weigh on its performance in the forthcoming quarters as well.

The earnings estimates of the company for the current quarter have declined 24.6% in the last 90 days to 89 cents per share with significant downward estimate revisions. The earnings estimates for the current year have also reduced 9.1% from $3.62 to $3.29 per share in the last 90 days, signifying negative investor confidence.

In order to optimize its operations through better asset utilization and improve its lackluster performance, Clearwater has recently decided to permanently close its Oklahoma City converting facility along with two of its tissue machines that are currently operating at the tissue facility in Neenah, WI. The Oklahoma facility, which converts tissue in to packaged products, is likely to run till Mar 31, 2017.

The machine shutdown will reduce production capacity at the Winconsin facility by 32,000 tons from the beginning of 2017. The facility will then operate three remaining tissue machines to manufacture a whole range of tissue products.

While the permanent closure will affect 131 employees at the Oklahoma facility, about 85 employees will be affected by the machine shutdown at the Winconsin facility. Clearwater intends to assist the retrenched employees in vocational training and other educational benefits to enable them to get employed as early as possible. The company expects the restructuring actions to save $7–$9 million in 2017.

Clearwater manufactures diversified paper and related products including, consumer tissue, away-from-home tissue, parent roll tissue, bleached paperboard and pulp. The company sells these products to major retailers and wholesale distributors, including grocery, drug, mass merchants and discount stores. The company also manufactures bleached paperboard used by quality-conscious printers and packaging converters.

Some better-ranked stocks in the industry include Fibria Celulose S.A. (NYSE:FBR) , Gerdau S.A. (NYSE:GGB) and Israel Chemicals Ltd. (NYSE:ICL) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fibria Celulose has beaten estimates thrice in the trailing four quarters for an average earnings surprise of 24.6%.

Gerdau has a forward P/E (F1) of 85.6x.

Israel Chemicals has long-term earnings growth expectation of 1.6% and has beaten estimates twice in the trailing four quarters for an average positive earnings surprise of 15.3%.

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