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Clearwater Paper (CLW) to Post Q4 Earnings: What's in Store?

Clearwater Paper Corporation CLW is slated to report fourth-quarter 2020 results on Feb 25, after the closing bell.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $468 million, indicating an improvement of 7.5% from the prior-year quarter. The same for earnings stands at $1.62, suggesting growth of 338% from the year-ago quarter. The earnings estimates have been remained stable over the past 30 days.

Q3 Results

In the last reported quarter, Clearwater Paper’s revenues and adjusted earnings per share both improved year over year driven by continued elevated demand and production of tissue products. The company beat the Zacks Consensus Estimate on both counts.

Notably, the company beat estimates in each of the trailing four quarters, the average being  233%.

Factors to Note

Clearwater Paper’s fourth-quarter results are likely to reflect the impact of ongoing strong demand for U.S. at-home tissue demand, low input costs and its ongoing efforts to drive operational improvements.

The company has been witnessing strong demand for tissue amid the pandemic. The market for tissue in the United States is traditionally two-third at-home and one-third away-from-home. With customers staying at-home amid the pandemic, it has led to heightened demand for tissue, and the fourth quarter was no exception.

However, several of the company’s large customers had placed heavy orders in the third quarter, leaving them with high inventories. This had led to slower orders in October as customers were adjusting their supply chains.  However, demand for tissue products increased significantly in November through mid-December due to surge in COVID-19 cases. Thus, overall volumes are likely to be higher in the fourth quarter on a year-over-year basis. This is likely to get reflected in the Consumer Products Segment’s sales performance.

The Zacks Consensus Estimate for the Consumer Products Segment’s sales for the fourth quarter is currently pegged at $261 million, indicating growth of 13% from the prior-year quarter. The segment might have benefited from low pulp costs. The estimate for the segment’s operating income is $30 million, suggesting a substantial improvement from the $1.6 million in the prior-year quarter.

In the Paperboard Products Segment, the folding carton customers, especially those with exposure to food and healthcare packaging continue to witness strong demand amid the pandemic. This is likely to get reflected in the segment’s fourth-quarter results. However, weak demand from foodservice customers, especially those with exposure to quick service restaurants and away-from-home dining, are likely to have somewhat offset these gains.

The Zacks Consensus Estimate for the Paperboard Products Segment stands at $207 million, suggesting a 1% rise from $205 million reported in the prior-year quarter. The estimate for the segment’s operating income is pegged at $32 million, suggesting a decline of 9% from the prior-year quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Clearwater Paper this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Clearwater Paper is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Price Performance

Clearwater Paper’s shares have gained 48.8% in the past year compared with the industry’s rally of 31.7%.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post earnings beat this quarter:

Brigham Minerals, Inc. MNRL has an Earnings ESP of +36.67% and a Zacks Rank of 2 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Koppers Holdings Inc. KOP currently has a Zacks Rank #3 and an Earnings ESP of +23.20%.

Franco-Nevada Corporation FNV has an Earnings ESP of +1.79% and a Zacks Rank #3, at present.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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