Domtar's (UFS) Q4 Earnings Miss Estimates As Costs Flare Up

Domtar Corporation (TO:UFS) reported mixed fourth-quarter 2017 results.

Earnings/Revenues

Quarterly adjusted earnings came in at 64 cents per share, missing the Zacks Consensus Estimate of 69 cents. The bottom line also came in lower than the year-ago tally of 75 cents per share.

Adjusted earnings for 2017 came in at $2.60 per share, missing the Zacks Consensus Estimate of $2.67. In addition, the figure also came in lower than the earnings of $2.84 per share recorded in the year-ago period.

Quarterly sales totaled $1,337 million, comfortably outpacing the Zacks Consensus Estimate of $1,288 million. The top line also came in 4.9% higher than the year-ago figure.

Segmental Break-Up

Quarterly revenues of the Pulp and Paper segment came in at $1,090 million, up 4.2% year over year. Also, sales from the Personal Care segment improved 8.3% year over year to $262 million.

Aggregate sales for 2017 came in at $5.2 billion, beating the Zacks Consensus Estimate of $5.1 billion. The top line also improved 1.2% year over year.

Other Financial Fundamentals

Cost of sales during the reported quarter was $1,076 million, up 7.3% year over year. Selling, general and administrative expenses went up 5.3% to $119 million.

In the fourth quarter, the company reported operating loss of $512 million, as against the operating income of $74 million recorded in the year-ago period. Goodwill impairment charge, input-cost inflation, lower productivity and elevated maintenance expenses were the primal causal factors behind the reported loss figure.

For 2017, the company reported an operating loss of $317 million, as against the operating income of $223 million reported for 2016.

Exiting 2017, the company had cash and cash equivalents of $139 million, higher than $125 million recorded on Dec 31, 2016. Long-term debt came in at $1,129 million, lower than $1,218 million recorded at the end of 2016.

At the end of 2017, Domtar Corporation generated $449 million from operating activities, as against $465 million cash generated in year-earlier period. Capital expenditure came in at $182 million compared $347 million recorded in the comparable period last year.

Outlook

Domtar Corporation noted that heightening competitive pressure will hurt its Personal Case business. The company believes extensive business rivalry might also weigh over its aggregate revenues in the quarters ahead. However, Domtar Corporation believes improved absorbent hygiene business will prove beneficial in the near future.

Moreover, the company expects that elevated costs will continue to hurt its near-term operating margins.

Zacks Rank & Other Stocks to Consider

Domtar Corporation carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same space are listed below:

KapStone Paper and Packaging Corporation (NYSE:KS) sports a Zacks Rank #1 (Strong Buy). The company’s earnings per share (EPS) are projected to be up 14% in the next three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

Veritiv Corporation (NYSE:VRTV) flaunts a Zacks Rank #1. The company’s EPS is projected to rise 10.7% over the next three to five years.

International Paper Company (NYSE:IP) also carries a Zacks Rank #2. The company’s EPS is estimated to be up 9.5% during the same time frame.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>