Rayonier Advanced Materials' Jesup plant. Image source: Rayonier Advanced Materials Inc.

What: Shares of Rayonier Advanced Materials Inc (NYSE:RYAM) rose 25.9% in May, driven primarily by a much better than expected first quarter earnings report.

So what: Quarterly revenue fell 2% to $218 million as cellulose specialties prices and volumes dropped, but net income almost doubled to $21 million, or $0.49 per share, and adjusted earnings of $0.36 per share were more than double what Wall Street expected. The results were a result of cost cutting measures that management has put in place, which are offsetting the weak top line.

Now what: What's most encouraging is that improvement on the bottom line doesn't seem to be a one-time phenomenon. Management increased EBITDA and free cash flow guidance to ranges of $185 million to $200 million and $85 million to $95 million, respectively. Now the challenge is growing the top line. For the rest of the year, investors should keep an eye on both pricing and volume, because without growth there the cost cutting measures that are boosting profits short-term won't sustain their impact.

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