Investors are bracing for the worst and waiting to see whether KapStone Paper and Packaging (NYSE: KS) will fall short of Wall Street forecasts for the fifth consecutive quarter. The company will unveil its latest earnings on Wednesday, Aug. 3. KapStone Paper and Packaging produces and sells a variety of unbleached kraft paper, linerboard, folding carton board, saturating kraft, inflatable dunnage bags, and dimensional lumber.

What analysts say:

  • Buy, sell, or hold?: Analysts strongly back KapStone, with three of five rating it a buy and the remainder rating it a hold. Analysts don't like KapStone as much as competitor Boise overall. KapStone's rating hasn't changed over the past three months.
  • Revenue forecasts: On average, analysts predict $210.7 million in revenue this quarter. That would represent a rise of 5.8% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.36 per share. Estimates range from $0.32 to $0.47.

What our community says:
CAPS All-Stars are solidly behind the stock, with 97.6% assigning it an "outperform" rating. The community at large agrees with the All-Stars, with 93.4% giving it a rating of "outperform." The message boards have been quiet lately, with only 41 posts in the past 30 days. Even with a robust four out of five stars, KapStone's CAPS rating falls a little short of the community's upbeat outlook.

Management:
KapStone's profit has risen year over year by an average of 19.3%. The company boosted its gross margin by 4.8 percentage points in the last quarter. Revenue rose 17.1% while cost of sales rose 9.5% to $142.7 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters. 

Quarter Q1 Q4 Q3 Q2
Gross Margin 31% 26.8% 31.5% 26.3%
Operating Margin 12.3% 8.8% 12.8% 6.3%
Net Margin 7.3% 6.6% 18.5% 3.6%
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