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Domtar (UFS) Soars 19.2%: Is Further Upside Left in the Stock?

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Domtar (UFS - Free Report) shares rallied 19.2% in the last trading session to close at $48.30. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 6.5% gain over the past four weeks.

Domtar’s shares gained after the company confirmed speculations that it is currently in discussions with Canada-based Paper Excellence for a possible business combination or acquisition. However, the company stated that these discussions might not result in an agreement.

Paper Excellence is a diversified manufacturer of pulp and specialty, printing and writing, and packaging papers. It has seven manufacturing facilities in Canada, and produces more than 3 million tons of paper annually and generates around $2.6 million in annual sales.

Price and Consensus

Price Consensus Chart for UFS

This paper and packaging maker is expected to post quarterly earnings of $0.51 per share in its upcoming report, which represents a year-over-year change of +466.7%. Revenues are expected to be $930 million, down 27.2% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Domtar, the consensus EPS estimate for the quarter has been revised 104.8% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on UFS going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 2 (Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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