Shares of paper and paper products manufacturer
KapStone Paper and Packaging Corporation
) scaled a 52-week high of $32.12 on Feb 27, before closing the
trading session nominally lower at $31.54. This translates to a
phenomenal year-over-year return of 136.8%. KapStone's share
prices have steadily been on the uptrend from Jun 2013.
This Zacks Rank #3 (Hold) stock is currently trading at a forward
P/E of 14.0x and is likely to continue the growth momentum in the
near future with long-term earnings growth expectations of 5.0%.
KapStone registered record fourth quarter and full year 2013
results primarily driven by the accretive acquisition of Longview
Fibre Paper and Packaging, Inc. Consolidated quarterly net sales
increased 87% year over year to $563 million as Longview
contributed $241 million of additional revenues. The company also
sold 703,000 tons of paper during the quarter compared with
408,000 tons in the year-earlier period.
Operating income for fourth quarter 2013 improved an astronomical
289% on a year-over-year basis to $74 million on the back of the
Longview acquisition and higher containerboard and corrugated
product prices, partially offset by higher fiber costs and a less
favorable product mix.
Consolidated net sales for full year 2013 increased 44% year over
year to $1,748 million. Operating income for the year doubled to
$220 million due to the Longview acquisition and higher selling
prices, partially offset by higher fiber and maintenance outage
Cash flow from operating activities improved to $130 million
during the reported quarter from $40 million in the prior-year
quarter. This enabled KapStone to repay $89 million of debt,
including a voluntary prepayment of $40 million. As a result, the
company reduced the debt leverage ratio to 2.7x from 3.8x.
Consequently, the company will be able to reduce its interest
margin spread on its bank loans by 25 bps from early Mar 2014.
Over the last 30 days, KapStone's earnings estimates for 2014
have climbed higher on expectations of a solid earnings momentum.
We also see an upward thrust on the stock backed by its strong
Other Stocks to Consider
Stocks in the industry that warrant a look include
Resolute Forest Products Inc.
), holding a Zacks Rank #1 (Strong Buy), and
Clearwater Paper Corporation
Fibria Celulose SA
), both carrying a Zacks Rank #2 (Buy).
CLEARWATER PAPR (CLW): Free Stock Analysis
FIBRIA CELULOSE (FBR): Free Stock Analysis
KAPSTONE PAPER (KS): Free Stock Analysis
RESOLUTE FOREST (RFP): Free Stock Analysis
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