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Domtar's (UFS) Q2 Earnings Miss, Revenues Beat Estimates

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Domtar Corporation (UFS - Free Report) reported second-quarter 2018 adjusted earnings of 65 cents per share, which increased 6.6% year over year. However, adjusted earnings missed the Zacks Consensus Estimate of 77 cents.

Including one-time items, Domtar posted earnings per share of 68 cents in the quarter compared with 61 cents reported in the year-ago quarter.

Consolidated sales totaled $1,353 million compared with $1,221 million in the year-earlier quarter, outpacing the Zacks Consensus Estimate of $1,323 million. The top-line performance is primarily attributable to strong price momentum in the Pulp and Paper businesses.

Domtar Corporation Price, Consensus and EPS Surprise

 

Domtar Corporation Price, Consensus and EPS Surprise | Domtar Corporation Quote

Consolidated operating income came in at $62 million, flat year over year. Higher average selling prices for pulp and paper and lower energy costs, partially offset by higher maintenance costs, higher selling, general and administrative expenses, lower volume and unfavorable productivity.

Segmental Break-Up

Quarterly revenues of the Pulp and Paper segment came in at $1,123 million, up 12% year over year. Sales from the Personal Care segment improved 3.8% year over year to $247 million. Strong cost savings and reduced overhead spending, partly muted by volume reduction and commodity inflation.

Balance Sheet & Cash Flow

At the end of the quarter under review, the company had cash and cash equivalents of $264 million, up from $139 million at the end of 2017. Long-term debt was $1,103 million as of Jun 30, 2018, compared with $1,129 million as of Dec 31, 2017.

Domtar generated $267 million of cash from operating activities during the six-month period ended Jun 30, 2018, compared with $212 million reported in the comparable period last year.

Moving Forward

Domtar expects to benefit from improvement in paper shipments. The announced price increases in paper are expected to positively impact results in second-half 2018 as well. Its Pulp business will benefit from lower planned maintenance costs, while the Personal Care segment’s results will likely improve toward the end of the year, driven by new customer wins.

Share Price Performance

Domtar has outperformed its industry with respect to price performance over the past year. The stock has gained around 29% compared with 15% growth recorded by the industry during the same time frame.



Zacks Rank & Other Stocks to Consider

Domtar currently flaunts a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the same sector include KapStone Paper and Packaging Corporation , Stora Enso Oyj (SEOAY - Free Report) and Svenska Cellulosa AB (SVCBY - Free Report) . While KapStone Paper and Stora Enso sport a Zacks Rank #1, Svenska Cellulosa carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KapStone Paper has a long-term earnings growth rate of 14%. The stock has appreciated around 52% in a year’s time.

Stora Enso has a long-term earnings growth rate of 11.8%. The company’s shares have gained 23% over the past year.

Svenska Cellulosa has a long-term earnings growth rate of 19.1%. Its shares have rallied 22% in the past year.

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