Shares of Rayonier Advanced Materials(NYSE: RYAM) jumped as much as 44.3% in trading on Wednesday after the company announced third-quarter 2022 financial results. Shares were up 39.2% at 3 p.m. ET and holding steady for the day.
Revenue was $466 million in the quarter, up 25% from a year ago. Adjusted EBITDA jumped 106% to $68 million and net income from continuing operations was $18 million, or $0.28 per share.
Analysts were only expecting earnings of $0.10 on revenue of $410 million, so this was a big earnings beat. Management also expects 2022 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to "exceed $175 million" and aims to reduce net debt to $725 million by the end of the year. This would reduce the net leverage ratio of 5.1 last quarter to a target of 4 before the company needs to refinance debt in June 2024.
Stocks only jump like this after a big earnings beat and this was a big beat indeed. Management is both growing and de-leveraging the business and that's great for investors long-term. The company was a little tepid on future results given a slowing economy, but "remain[s] optimistic" about future productivity and value gains.
This is a very bullish result for the company but given the current debt load I would like to see a few more quarters of solid cash flow before getting too excited about the stock.
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