Clearwater Paper Revises Q2 Guidance - Analyst Blog

Paper and paper product manufacturer Clearwater Paper Corporation CLW recently revised its guidance for the second quarter of 2014 to better reflect the current market conditions. The narrowed guidance further had a bearish effect on the share prices and pulled the stock down by 1.0% in after-hours trading to $63.43.

Clearwater Paper currently expects second-quarter revenues to be up 3.4% sequentially compared with first-quarter 2014, marginally down from the previous expectations of 3.5% growth. Operating margin is expected to vary within 6–7%, down from 6–8% expected earlier.

The reduced guidance is primarily due to some operational issues at the Arkansas pulp and paperboard facility of the company, resulting in low yields despite high energy and chemical consumption. Lower production levels have also more than offset the record shipments from its Lewiston pulp and paperboard facility. To add to the woes of higher production costs and lower shipment volumes, inclement weather conditions in southeastern U.S. have further driven fiber prices up to adversely affect the operating margins.

Earlier in Feb 2014, Clearwater Paper announced the permanent closure of its manufacturing facility in Long Islands, New York to reduce operating costs. Although the company acknowledged the severity of the decision, which affected around 155 employees, it maintained that the compromise was the best possible alternative to sustain profitable operations. With the closure of this tissue converting and distribution facility, manufacturing process was centered on other low-cost facilities.

Clearwater Paper expects the operational issues in the Arkansas facility to continue till the next scheduled maintenance in March 2015. Consequently, the company expects a $1 million cost headwind each quarter through the first quarter of 2015.

Clearwater manufactures and sells pulp-based products such as consumer tissue, away-from-home tissue, parent roll tissue, machine glazed tissue, and bleached paperboard. The company has 13 manufacturing facilities across the U.S. and Canada.

Clearwater currently has a Zacks Rank #4 (Sell). Other players in the industry worth mentioning include Tupperware Brands Corporation TUP, Unilever NV UN and Unilever plc UL, each carrying a Zacks Rank #2 (Buy).