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Why Rayonier Advanced Materials Inc.'s Shares Jumped 35% Today

By Travis Hoium - May 3, 2016 at 1:45PM

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Better-than-expected earnings caused a pop, but it's guidance that got investors really excited.

Image source: Rayonier Advanced Materials.

What: Shares of Rayonier Advanced Materials Inc. (RYAM -1.93%) jumped as much as 35% today after reporting better-than-expected earnings.

So what: First-quarter 2016 revenue fell 2% to $218 million as cellulose specialties sale prices and volumes fell. Net income, however, nearly doubled to $21 million, or $0.49 per share. On an adjusted basis, which pulls out one-time items, earnings per share were $0.36 versus a $0.15 estimate from Wall Street.  

Now what: Prices and volumes continue to be weak for Rayonier Advanced Materials, but cost-cutting measures are starting to kick in. As a result, management increased EBITDA and adjusted free cash flow guidance by $10 million to $185 million-$200 million and $85 million-$95 million, respectively. This increase in cash flow is a real positive short term, but keep an eye on the long-term pricing and volume trends as the year goes on. Long term, if there's no recovery in demand, the business will deteriorate over time and that should still be a concern despite today's pop.

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