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Domtar's (UFS) Q3 Earnings & Sales Top Estimates, Down Y/Y

Zacks Equity Research
·4 min read

Domtar Corporation UFS reported third-quarter 2020 adjusted earnings of 33 cents per share, as against the Zacks Consensus Estimate of a loss of 28 cents. However, the bottom-line figure plunged 63% from the prior-year quarter.

Including one-time items, Domtar reported loss per share of $1.67 in the quarter as against the earnings per share of 32 cents recorded in the prior-year quarter.

Consolidated sales declined 12.4% year over year to $1,124 million. The top-line figure, however, beat the Zacks Consensus Estimate of $1,054 million.

Operational Highlight

Consolidated adjusted operating income came in at $43 million in the September-end quarter compared with the year-ago quarter’s $73 million. This downside resulted from lower volume and unfavorable productivity.

Domtar Corporation Price, Consensus and EPS Surprise

Domtar Corporation Price, Consensus and EPS Surprise
Domtar Corporation Price, Consensus and EPS Surprise

Domtar Corporation price-consensus-eps-surprise-chart | Domtar Corporation Quote

Segmental Performance

Quarterly revenues of the Pulp and Paper segment came in at $899 million, down 16.7% year over year. Adjusted operating income for the segment was $38 million in the third quarter, down from the year-earlier reported figure of $68 million.

Sales in the Personal Care segment increased 10.9% year over year to $243 million. The adjusted operating income for the segment came in at $16 million, up from the $9 million reported in the comparable period last year.

Balance Sheet & Cash Flow

The company had cash and cash equivalents of $218 million as of Sep 30, 2020, up from $61 million as of Dec 31, 2019. Net debt-to-total capitalization ratio was 28% as of Sep 30, 2020, up from the 26% as of Sep 30, 2019.

Domtar generated $121 million of cash from operating activities during the September-end quarter compared with the $108 million reported in the year-ago quarter.

Outlook

The company expects sequentially flat paper volume in the current quarter, while seasonality is likely to affect mix. Pulp markets are anticipated to gradually improve on better demand environment, maintenance outages and restocking in China. Domtar believes the Personal Care business will continue to gain from higher usage and new customer wins. Overall raw material costs will likely be stable, while planned maintenance costs will be lower in the December-end year.

Price Performance

The stock has appreciated 21.7% in the past six months compared with the industry’s growth 30%.



Zacks Rank & Key Picks

Domtar currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Newmont Corporation NEM and Barrick Gold Corporation GOLD. While Agnico Eagle Mines and Newmont sport a Zacks Rank #1 (Strong Buy), Barrick Gold carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines Limited has an expected earnings growth rate of a whopping 103% for the current year. The company’s shares have rallied 30.4% over the past six months.

Newmont has a projected earnings growth rate of 98% for 2020. The company’s shares have gained 8.3% in the past six months.

Barrick Gold has an estimated earnings growth rate of 99% for the ongoing year. The stock has appreciated 10.9% in the past six months.

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