Hot Stock in Focus: KapStone Paper and Packaging Corporation (NYSE: KS)

On Friday, Shares of KapStone Paper and Packaging Corporation (NYSE: KS) showed the bearish trend with a lower momentum of -0.14% and ended its trading session at $34.77. The company traded total volume of 339.42K shares as contrast to its average volume of 638.34K shares. The company has a market value of $3.40B and about 97.76M shares outstanding. During the 52-week trading session, the minimum price at which share price traded was registered at $20.42 and reached the max level of $35.01.

KapStone’s consolidated net sales were $799.0M in the first quarter of 2018, increasing by 4% contrast to $766.0M for Q1 2017. The increase in net sales was mainly because of higher prices, partially offset by lower sales volume. The Company’s stated numbers topped analysts’ estimates by $6.90M.

During Q1 FY18, KapStone sold 662.0K tons of paper contrast to 699.0K tons in Q1 FY17. The Company’s volume was lower in the stated quarter as mill production was limited because of a boiler upgrade at the Charleston mill which reduced production by about 26.0K tons. KapStone’s average mill selling price of $719 per ton in Q1 2018 increased $71 per ton, or about 11% on a y-o-y basis because of higher prices for most products and a favorable product mix. KapStone’s Mill selling prices increased $21 per ton, or 3% on a y-o-y basis, because of higher specialty product prices and a better product mix.

For Q1 2018, KapStone recorded net income of $32.70M, or $0.33 per diluted share, contrast to $6.00M, or $0.06 per diluted share, in Q1 2017. The higher earnings in the stated quarter mainly reflected higher selling prices and a better product mix of $48.0M, favorable productivity of $10.0M mainly because of higher mill production, lower recycled fiber costs of $6.0M, non-recurring FY17 costs of $5.0M associated with ratifying a union contract at the North Charleston paper mill, a $7.0M gain on the sale of the former Oakland box plant site, and a lower effective income tax rate resulting from the passage of the Tax Cuts and Jobs Act passed in December 2017.

On a non-GAAP basis, KapStone recorded earnings of $0.43 per share contrast to $0.15 per share in Q1 2017, reflecting growth of 187%. The Company’s earnings beat Wall Street’s estimates of $0.37 per share.

Cash Flow and Working Capital:

As of March 31, 2018, KapStone’s cash and cash equivalents were $18.70M contrast to $28.10M as on December 31, 2017. The Company’s operating activities offered $5.0M during the stated quarter, while investing activities used $22.0M, counting $37.0M for capital expenditures, partially offset by $15.0M of proceeds from the sale of the former Oakland box plant site. KapStone’s financing activities offered $8.0M of cash in Q1 2018, mainly reflecting higher borrowings, partially offset by a quarterly dividend payment and the Victory Packaging contingent consideration payment.

At March 31, 2018, KapStone had about $431.0M of working capital and $466.0M of revolver borrowing capacity. The Company’s net debt to earnings before interest, tax, depreciation, and amortization (EBITDA) ratio as defined by the bank agreement reduced to 2.96 times at March 31, 2018, down from 3.99 a year ago.

The Company offered net profit margin of 8.10% while its gross profit margin was 29.60%. ROE was recorded as 25.90% while beta factor was 3.28. The stock, as of recent close, has shown the weekly upbeat performance of 0.52% which was maintained at 53.46% in this year.

Grover Beam

Grover Beam has over 14 years experience in the financial services industry giving him a vast understanding of how news affects the financial markets. He is an active day trader spending the majority of her time analyzing earnings reports and watching commodities and derivatives. He has a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

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