We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Investors Should Ignore Domtar (UFS) Stock Now
Read MoreHide Full Article
Domtar Corporation is being weighed down by higher maintenance costs, competitive pressure and volatile demand for softwood and pulp. Weak price performance and lowered earnings estimates do not instill investor confidence in the stock.
The company, with a market capitalization of $2.3 billion, carries a Zacks Rank #5 (Strong Sell) at present. In the past six months, the company’s shares have fallen 2.5% against the industry’s growth of 11%.
Factors Weighing on Domtar
Domtar reported third-quarter 2019 adjusted earnings of 89 cents per share, which reflected a year-over-year decline of 35% thanks to lower selling prices in pulp, market-related downtime costs and the Espanola outage. Consolidated sales declined 6% year over year to $1,283 million.
For fourth-quarter 2019, Domtar anticipates seasonally higher maintenance activity owing to annual shutdowns at some of its major facilities to hurt the Pulp and Paper business’ results. Further, the Paper segment is likely to be affected by a seasonally unfavorable mix. The fourth-quarter results are also likely to show increased maintenance activity.
Domtar expects raw-material cost inflation to continue to weigh on margins. Global demand for softwood and pulp is also likely to be volatile owing to consumer inventory swings and macroeconomic conditions.
The company faces tremendous competitive pressure from local, and some global producers, which often possess relatively greater financial resources and lower production costs. As such, Domtar has to make continued investments in value drivers, which act as a hedge against stiff competition but reduce its profitability to some extent. Also, given its international presence, the company often faces unfavorable foreign currency movements, impacting its top-line growth. The ongoing slowdown in the manufacturing industry continues to have an adverse impact on business.
Bottom-Line Estimate Trend
The Zacks Consensus Estimate for Domtar’s fiscal 2020 earnings has declined 10% in the past 90 days. The Zacks Consensus Estimate for earnings per share is currently pegged at $2.41 for the fiscal, suggesting a year-over-year decline of 23.9%.
Daqo New Energy has a projected earnings growth rate of 326.3% for the current year. The company’s shares have gained 26% over the past six months.
Commercial Metals has an estimated earnings growth rate of 17.2% for the ongoing year. The stock has gained 22% over the past six months.
Silver Standard Resources has an estimated expected earnings growth rate of 40.6% for fiscal 2020. The company’s shares have gained 12% in the past six months.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Image: Shutterstock
Here's Why Investors Should Ignore Domtar (UFS) Stock Now
Domtar Corporation is being weighed down by higher maintenance costs, competitive pressure and volatile demand for softwood and pulp. Weak price performance and lowered earnings estimates do not instill investor confidence in the stock.
The company, with a market capitalization of $2.3 billion, carries a Zacks Rank #5 (Strong Sell) at present. In the past six months, the company’s shares have fallen 2.5% against the industry’s growth of 11%.
Factors Weighing on Domtar
Domtar reported third-quarter 2019 adjusted earnings of 89 cents per share, which reflected a year-over-year decline of 35% thanks to lower selling prices in pulp, market-related downtime costs and the Espanola outage. Consolidated sales declined 6% year over year to $1,283 million.
For fourth-quarter 2019, Domtar anticipates seasonally higher maintenance activity owing to annual shutdowns at some of its major facilities to hurt the Pulp and Paper business’ results. Further, the Paper segment is likely to be affected by a seasonally unfavorable mix. The fourth-quarter results are also likely to show increased maintenance activity.
Domtar expects raw-material cost inflation to continue to weigh on margins. Global demand for softwood and pulp is also likely to be volatile owing to consumer inventory swings and macroeconomic conditions.
The company faces tremendous competitive pressure from local, and some global producers, which often possess relatively greater financial resources and lower production costs. As such, Domtar has to make continued investments in value drivers, which act as a hedge against stiff competition but reduce its profitability to some extent. Also, given its international presence, the company often faces unfavorable foreign currency movements, impacting its top-line growth. The ongoing slowdown in the manufacturing industry continues to have an adverse impact on business.
Bottom-Line Estimate Trend
The Zacks Consensus Estimate for Domtar’s fiscal 2020 earnings has declined 10% in the past 90 days. The Zacks Consensus Estimate for earnings per share is currently pegged at $2.41 for the fiscal, suggesting a year-over-year decline of 23.9%.
Stocks to Consider
Some better-ranked stocks in the Basic Materials Sector are Daqo New Energy Corp (DQ - Free Report) , Commercial Metals Company (CMC - Free Report) and Silver Standard Resources Inc. (SSRM - Free Report) . All of these stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy has a projected earnings growth rate of 326.3% for the current year. The company’s shares have gained 26% over the past six months.
Commercial Metals has an estimated earnings growth rate of 17.2% for the ongoing year. The stock has gained 22% over the past six months.
Silver Standard Resources has an estimated expected earnings growth rate of 40.6% for fiscal 2020. The company’s shares have gained 12% in the past six months.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>