It has been about a month since the last earnings report for Domtar (UFS - Free Report) . Shares have added about 5.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Domtar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Domtar's Q2 Earnings Miss, Revenues Beat Estimates
Domtar 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.
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.
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.
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.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 5.27% due to these changes.
At this time, Domtar has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks style scores indicate that the company's stock is suitable for value and growth investors.
Domtar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.