Personal Finance

Why Shares of Rayonier Advanced Materials Are Getting Slammed Today

Image of cigarettes
Image of cigarettes

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Shares of Rayonier Advanced Materials (NYSE: RYAM) , a manufacturer of high-purity cellulose used in cigarette filters, paints, pharmaceuticals, and foods, among other products, are getting slammed after the market wasn't satisfied with fourth-quarter results -- the stock is down 20% as of 2:30 p.m. EST.

So what

Sales during the fourth quarter checked in at $231 million, down from the prior year's $242 million result. Comparable results were down across the board, including declines in operating income and net income, and earnings per share checked in at $0.18 per share, down significantly from the prior year's $0.30 per share. The culprit behind the company's struggles was easy to find: pricing headwinds. Despite a slightly challenging year, Rayonier put a positive spin on things.

"Our employees' execution against our 2016 objectives delivered impressive financial and operational results," said Paul Boynton, chairman, president and chief executive officer, in a press release. "Our focus on transforming our business yielded significant improvements in our cost position and our efforts to reposition our balance sheet provide a foundation for future growth initiatives."

Now what

Unfortunately for investors, pricing headwinds look to persist in the near term. Management anticipates cellulose specialties prices to decline another 3% to 4% from 2016 levels. In hopes to help offset pricing headwinds, the company has achieved $85 million in cost improvements, with $50 million of that taking place during 2016. The company hopes to improve costs by another $50 million total over the next two years. Until prices rebound or management proves it can more than offset the headwinds, investors shouldn't expect a quick rebound after today's drop.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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