Please ensure Javascript is enabled for purposes of website accessibility

Why Resolute Forest Products Stock Sank Today

By Howard Smith - Apr 29, 2021 at 3:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Preliminary first-quarter results from the company were far from expectations.

What happened

Canadian pulp and paper manufacturer Resolute Forest Products (RFP 0.10%) provided investors with preliminary first-quarter 2021 financial results today, and the market didn't approve. Shares of Resolute were down almost 16% as of 2:30 p.m. EDT.

So what

Though the company confirmed that it is riding a tailwind with higher lumber prices, Q1 earnings fell far short of what analysts anticipated. Resolute reported that Q1 earnings are expected to come in at $1.06 per share. Though that compares to a loss of $0.01 per share in the year-ago period, the average analyst estimate was for earnings of $1.66 per share, according to MarketWatch. 

Lumber products stacked in warehouse.

Image source: Resolute Forest Products.

Now what

Resolute's wood products business was expected to thrive in today's environment of high lumber prices. Investors have piled into the company's stock in 2021, with shares doubling just since the start of the year, even after today's drop. The price of lumber is at an all-time high having soared more than 230% since the start of the pandemic. 

Resolute President and CEO Remi G. Lalonde commented on the impacts of the higher commodity price, saying in a statement, "This has been a very good quarter for our strong and growing wood products business as the lumber tailwind continues." 

The strength of the company's wood products and market pulp business was offset, however, with operating losses incurred in its tissue and paper segments. Investors today are locking in gains after the sharp increase in the stock over the past several months. 

Howard 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Resolute Forest Products Stock Quote
Resolute Forest Products
$20.52 (0.10%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.