Neenah Paper’s (NP) recent results have been better than expected, and analysts have been raising their earnings estimates.
Company Description
Neenah Paper manufactures and distributes a wide range of premium and specialty paper grades, with well-known brands such as Classic, Environment, Kimdura, and Munising. The company also produces and sells bleached pulp, primarily for use in the manufacture of tissue and writing papers.
Business Is Improving
Management indicated that its businesses continue to gain momentum with a fourth sequential quarterly increase in sales, EBIT, and margins. The company has been able to maintain cost reduction efforts and increase selling prices.
Additionally, the company is using its cash flow to pay down debt.
Neenah Paper’s improved results and balance sheet caught the attention of Moody’s (MCO), which placed all of its ratings on Neenah Paper on review for possible upgrades. If Moody’s upgrades Neenah Paper’s debt ratings, its borrowing will decrease.
Fourth-Quarter Results
Neenah Paper reported fourth-quarter results on February 24. The company had net sales of $155 million, up 5% from the year-ago quarter, and adjusted earnings of $0.34 per share, compared to an adjusted loss of $0.62 per share in the fourth quarter of 2008. That trounced the Zacks Consensus Estimate of $0.19 per share.
Management also provided its outlook for 2010. The company expects to see a modest recovery in market demand, sustained benefits from most of its 2009 cost reduction initiatives, and higher material input costs that will be partly offset by lower energy costs and higher selling prices.
The company paid a quarterly cash dividend of $0.10 per share on March 2.
Analysts Increase Estimates
After another blow-out quarterly report, analysts are lifting their earnings estimates for the next two years. In the last week, the Zacks Consensus Estimate for 2010 jumped from $0.93 to $1.13, and the Zacks Consensus Estimate for 2011 moved up from $1.50 to $1.55.
