Shares of Veritiv (VRTV 2.99%) spiked 80% higher on Wednesday morning and traded up more than 50% later in the day after the packaging company reported much better-than-expected quarterly results.
On Wednesday morning, Veritiv reported fourth-quarter earnings of $1.90 per share, easily beating analyst expectations for a $0.73 per-share loss. Revenue came in at $1.6 billion, down 10% year over year but about $80 million above what analysts had expected.
The company outperformed because it was able to improve working capital, and in doing so, it made progress paying down its debt. As of year's end, its net debt was 2.1 times adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), down from 4.1 times a year prior.
"We made significant progress this year toward our vision of being a leading provider of packaging products, services and solutions," CEO Sal Abbate said in a statement. "Despite the challenging market environment, the fundamentals of our business improved in a step-wise manner, driven by packaging segment growth and the execution of our multi-year strategy, including our broad-based efficiency programs."
Veritiv also announced a $50 million stock repurchase program, another benefit of getting debt under control. The company said it expects revenue to be flat in 2021, with the pandemic continuing to impact a lot of its business. But it believes it can generate at least $75 million in free cash flow and adjusted EBITDA in the range of $195 million to $205 million, compared to $187.6 million in adjusted EBITDA in 2020.
Following the big move higher on Wednesday, Veritiv stock is now up nearly 200% in the last year, but still just flat over the past three years. The markets are reassessing the business following that strong quarter, and investors on Wednesday like what they see.