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Why Resolute Forest Products Stock Sank Today

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

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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.

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Stocks Mentioned

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

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