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Why Rayonier Advanced Materials Stock Just Dropped 23%

By Rich Smith – Nov 5, 2019 at 1:00PM

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Both the Q3 results and the Q4 forecast look exceedingly bleak.

What happened

Shares of cellulose specialty products maker Rayonier Advanced Materials (RYAM -1.20%) are down 22.8% as of 12:05 p.m. EST, after Rayonier disappointed investors mightily in its third-quarter earnings report, released last night.  

Expectations were already low heading into earnings, with analysts forecasting an $0.18-per-share loss on sales of $470.6 million -- yet Rayonier managed to underperform nonetheless, reporting a loss of $0.29 per share and sales of just $416 million.  

Neon stock display showing a crash

Image source: Getty Images.

So what

Rayonier's big Q3 loss stood in stark contrast to the $0.47 per share profit the company had earned in the year-ago quarter. Sales declined 17% year over year.

CEO Paul Boynton blamed "duties on products sold into China" and "price declines in commodity segments" for the poor performance, but insisted Rayonier is making "progress ... on our initiatives to overcome these difficult market conditions."

But the opposite seems more true. Sales so far this year are down "only" 11.5% in total, so it actually seems Rayonier's difficulties are growing, not shrinking.

Now what

Nor did Rayonier's forecast for the rest of this year give much reason for hope. Rayonier issued the following warnings:

  • Prices on "cellulose specialties" that it produces will be down by an average of "approximately 1 to 2 percent" through the end of this year.
  • "Global pulp prices" are also under "pressure."
  • "North American paperboard prices will remain under pressure primarily due to increased competition."
  • "In newsprint, demand continues to decline."

Right now, the only bright spot in the forecast is for forest products, inasmuch as "U.S. housing starts and remodeling activity ... have remained relatively flat in 2019." So long as interest rates stay low, demand there should hold up well.

Then again, that didn't help Rayonier avoid a 24% decline in forest products last quarter, or save it from losing money, either.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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