Domtar Corporation is poised to gain from focus on cost savings, reduced overhead spending, new customer wins and price increases. Its balanced capital-deployment approach will also drive growth. We are optimistic about the company’s prospects and believe this is the right time to add the stock to your portfolio, as it is poised to carry the bullish momentum ahead.

 

Let's delve deeper and analyze the factors that make this manufacturer of fiber-based products including communication, specialty and packaging papers an attractive investment option.

 

 

Solid Rank & VGM Score: Domtar currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

The company also flaunts a Value Growth Momentum Score (VGM Score) of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best investment opportunities. Consequently, the company appears to be a potential investment proposition at the moment.

 

Above the Industry: Over the past year, Domtar has outperformed the industry it belongs to. The company’s shares have jumped around 29% compared with growth of 14% recorded by the industry.

 

 

Upward Estimate Revisions: The Zacks Consensus Estimate for earnings per share for 2018 has increased 7% to $3.86, in the last 30 days. The same for 2019 has gone up 14% to $4.28.

 

Positive Earnings Surprise History: Domtar has an impressive earnings surprise history. It outpaced the Zacks Consensus Estimates in three of the trailing four quarters, delivering an average positive earnings surprise of 11%.

 

Strong Q2 Results: Domtar reported second-quarter 2018 adjusted earnings of 65 cents per share, increasing 6.6% year over year. Consolidated sales totaled $1,353 million compared with $1,221 million in the year-ago quarter, primarily attributable to strong price momentum in the Pulp and Paper businesses.

 

Upbeat 2018 Outlook: Domtar expects to benefit from improvement in paper shipments. The announced price increases in paper are anticipated to positively impact results in second-half 2018 as well. Market conditions and order books continue to be favorable for the Pulp and Paper businesses. Further, both of these businesses will witness impressive sales momentum and cash flow. Domtar will also gain from its focus on cost savings, reduced overhead spending and customer portfolio-transition efforts.

 

Growth Drivers in Place: Domtar will continue to pursue a balanced approach to the deployment of capital while maintaining the flexibility to carry out growth strategy. The company also remains focused on investing in innovation. It recently invested in Prisma Renewable Composites, a company focused on developing advanced materials from lignin and other natural resources. This investment will help commercialize the process of using lignin to make engineered plastic compounds, and other high-value fiber and lignin applications.

 

Domtar has also prioritized reinvesting in assets, notably in pulp mills. Additionally, the company will invest in its next repurposing opportunity. In line with this, it conducted an asset review over the last several quarters. This review will help identify assets having long-term growth prospects, mainly around coated freesheet, while looking at the feasibility of other grades, including linerboard and pulp.

 

Domtar has a long-term earnings growth rate of 5%.

 

 

Some top-ranked stocks in the same sector include Celanese Corporation (CE Quick QuoteCE - Free Report) , Huntsman Corporation (HUN Quick QuoteHUN - Free Report) and KMG Chemicals, Inc. . All three stocks flaunt a Zacks Rank #1.

 

Celanese has a long-term earnings growth rate of 10%. The stock has gained around 19% in a year’s time.

 

Huntsman Corporation has a long-term earnings growth rate of 8.5%. The company’s shares have been up 24% during the past year.

 

KMG Chemicals has a long-term earnings growth rate of 28.5%. Its shares have appreciated 37% in the past year.

 

 

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.