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Paper Stocks To Watch For Earnings On Nov 1: KS And GLT

Published 10/30/2016, 09:29 PM
Updated 07/09/2023, 06:31 AM

The Paper and related products industry falls under the Basic Materials sector – one of the 16 broad Zacks sectors. The 60% of the companies in this sector that have reported so far have come up with a 25.7% increase in earnings. Considering the companies that are yet to report, the sector’s earnings are expected to rise 2.2% in the quarter. This is a reversal from the 11.6% decline suffered in the second quarter.

The earnings growth graph so far has been encouraging for this quarter with total 58.2% of the companies in the S&P 500 logging a growth of 2.2%. Taking into consideration the estimates from the still-to-come 209 index members, total earnings in the quarter is now expected to be up 2.0% year over year on the back of 1.4% higher revenues. This compares favorably with the decline of 2.8% in the second quarter on flat revenues. Though the growth rate is meager, compared to the decline for five consecutive quarters, this is definitely a positive sign. (Read more: An end to the earnings recession)

The world’s largest paper and pulp maker – International Paper Company (NYSE:IP) – reported lackluster third-quarter 2016 results with adjusted operating earnings of $380 million or 91 cents per share compared with $407 million or 97 cents per share in the year-ago quarter. Operating earnings declined year over year due to lower revenues, while it also missed the Zacks Consensus Estimate of 94 cents. However, the company witnessed meaningful input cost inflation in the quarter, primarily on OCC and natural gas as well as a less favorable box mix along with modest price erosion, predominantly in the North American Industrial Packaging business.

Conversely, the company sees improved market demand across both its North American box business and global pulp business. The company experienced strong operational performances across its North American, EMEA and Brazil papers business as well as continuing strong performance in the Ilim joint venture in Russia.

With this as the backdrop, investors would be interested to see how other paper stocks fare in their releases on Nov 1. Apart from beats and misses, focus will be on management outlook.

Manufacturer and seller of containerboards, corrugated products and specialty paper products, KapStone Paper and Packaging Corporation (NYSE:KS) is scheduled to report quarterly numbers after the market closes. In the last reported quarter, the company had reported a 40% plunge in earnings while sales had improved 17% year over year.

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In the last quarter, the company had delivered a negative earnings surprise of 13.33%. KapStone Paper has a negative record of earnings surprise, lagging the Zacks Consensus Estimate in three of the four trailing quarters, with an average negative surprise of 17.84%.

KAPSTONE PAPER Price and EPS Surprise

KAPSTONE PAPER Price and EPS Surprise | KAPSTONE PAPER Quote

The company expects lower maintenance outage in the third quarter compared with the second. Fiber cost should be lower as virgin fiber costs are declining, while OCC prices are increasing. Benefits of its headcount reduction initiative will reduce expenses by $2 million.

The combination of the company’s Zacks Rank #1 (Strong Buy) and Earnings ESP of +2.56% make us confident of an earnings beat. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

PH Glatfelter Co. (NYSE:GLT) , a paper manufacturing company that manufactures printing papers and tobacco paper along with other specialty papers will report third-quarter 2016 results.

The company delivered a 50.00% positive earnings surprise in the last quarter. The company has a mixed track record, outpacing the Zacks Consensus Estimate in two of the four trailing quarters, while lagging in the other two, with an average negative earnings surprise of 7.37%.

GLATFELTER Price and EPS Surprise

GLATFELTER Price and EPS Surprise | GLATFELTER Quote

For the third quarter, the company expects shipping volumes to increase slightly compared to the second quarter. Further, average selling prices and raw material as well as energy prices will be in line with the second quarter. Glatfelter has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00% which makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

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INTL PAPER (IP): Free Stock Analysis Report

KAPSTONE PAPER (KS): Free Stock Analysis Report

GLATFELTER (GLT): Free Stock Analysis Report

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