Mercer International (MERC) Q4 Earnings Lag Estimates, Dip Y/Y
Mercer International MERC reported earnings per share of 30 cents per share in fourth-quarter 2022, which missed the Zacks Consensus Estimate of 49 cents. The bottom-line figure indicated a 73% decline from the prior year due to lower sales volumes and lumber sales realizations, and higher fiber costs. Earnings also reflect the impacts of planned major maintenance in the quarter.
The company generated revenues of $583 million in fourth-quarter 2022, reflecting year-over-year growth of 12.4%. Improved pulp sales realizations and the inclusion of the Torgau facility from Sept 30, 2022, were partially offset by lower sales volumes and lumber sales realizations.
The cost of sales was $451 million, marking a 34.5% year-over-year rise. The increase was attributed to higher per-unit fiber and chemical costs, and maintenance costs. Gross profit declined 28% year over year to $132 million. The gross margin was 22.6% in the reported quarter, marking a contraction from 35.4% in the prior-year quarter.
Selling, general and administrative expenditures surged 91% to $35.8 million from the year-ago quarter. Operating income plunged 64% year over year to $47 million in the quarter.
Mercer International Inc. Price, Consensus and EPS Surprise
Mercer International Inc. price-consensus-eps-surprise-chart | Mercer International Inc. Quote
Operating EBITDA was $96 million in the reported quarter, which declined 42% from the prior-year quarter. Higher per-unit fiber and chemical costs, and maintenance costs, partially offset by higher pulp sales realizations and the positive impact of a stronger dollar, led to the downfall. The operating EBITDA margin was 16.5% compared with 31.8% in the year-ago quarter.
Pulp: Net sales increased 6% year over year to $463 million from the prior-year quarter. The segment reported an operating income of $69 million, a 39% slump from the $113 million reported in the last year’s comparable quarter.
Solid Wood: Net sales improved 46% year over year to $118 million, reflecting the contribution from the recently acquired Torgau mill. The segment reported an operating loss of $14.3 million in the quarter compared with $18 million in the prior-year quarter.
Mercer International’s cash and cash equivalents were $354 million at the end of 2022 compared with $346 million at the end of 2021. Operating cash flow was $361 million in 2022, marking an increase from $182 million in the prior year. The company’s long-term debt was $1.35 billion as of Dec 31, 2022, up from $1.24 billion as of Dec 31, 2021.
MERC’s adjusted earnings per share gained 44% year over year to $3.71 in 2022. The bottom line, however, missed the Zacks Consensus Estimate of $3.90. Sales increased 26.5% year over year to a record $2.28 billion on higher sales realizations, rising pulp sales volumes and the contribution from the Torgau facility.
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Over the past year, Mercer International’s shares have fallen 10.8% compared with the industry’s 19.4% decline.
Zacks Rank & Stocks to Consider
MERC currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the basic materials space are CalMaine Foods, Inc. CALM, Reliance Steel & Aluminum Co. RS and Teck Resources Limited TECK. CALM and RS currently sport a Zacks Rank #1 (Strong Buy), and TECK carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CalMaine Foods’ fiscal 2023 earnings per share is pegged at $16.75, suggesting 515.8% growth from the year-ago reported figure. Earnings estimates have moved 106.8% north in the past 60 days. CALM has a trailing four-quarter earnings surprise of 15.3%, on average. Its shares have gained 43.6% in the past year.
The Zacks Consensus Estimate for Reliance Steel’s earnings per share is pegged at $18.26 for 2023. Earnings estimates have been revised 7.4% upward in the past 60 days. RS has a trailing four-quarter average surprise of 13.4%, on average. The company has gained 41.7% in a year.
The Zacks Consensus Estimate for Teck Resources’ 2022 earnings per share is pegged at $6.89, suggesting 52.43% growth from the year-ago reported figure. Earnings estimates have moved 0.7% north in the past 60 days. TECK has a trailing four-quarter earnings surprise of 3.7%, on average. Its shares have gained 24.4% in the past year.
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