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RBC analyst bullish on Clearwater Paper's strategic transactions, raises shares PT

EditorIsmeta Mujdragic
Published 08/07/2024, 12:27 PM

CLW
-0.74%

On Wednesday, RBC Capital updated its outlook on Clearwater Paper (NYSE:CLW), raising the price target to $48 from the previous $42 while maintaining a Sector Perform rating. The adjustment followed Clearwater's Q2 2024 report of Adjusted EBITDA at $35.3 million, which was marginally lower than RBC Capital's forecast of $38.2 million.

Clearwater Paper's recent performance has prompted RBC Capital to acknowledge the company's efforts in executing two significant transactions successively and establishing a clear strategy for future operations.

Despite this positive recognition, RBC Capital sustains its Sector Perform rating, signaling a neutral stance on the stock. The firm's cautious outlook is primarily attributed to the current uncertainties in the Solid Bleached Sulphate (SBS) market, which could impact Clearwater's near-term prospects.

The paper manufacturer's latest financial results and strategic moves are indicative of its commitment to shaping the company's trajectory. Clearwater's actions are seen as steps towards strengthening its market position, although they have not swayed RBC Capital to alter its rating at this time.

The stock's performance and RBC Capital's updated price target will likely be monitored closely by shareholders and potential investors as they assess Clearwater Paper's financial health and strategic direction in the context of the broader market conditions.

In other recent news, Clearwater Paper Corporation has announced the sale of its tissue unit to Sofidel America Corporation for a total of $1.06 billion. This strategic move is expected to allow Clearwater Paper to focus more on its paperboard operations. The transaction is anticipated to close in late 2024, pending customary conditions, including antitrust approvals.

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The sale is part of Clearwater Paper's plan to reduce its net debt and invest in growth initiatives for its remaining business. The company expects net proceeds of around $850 million from the sale. Goldman Sachs & Co. LLC and Pillsbury Winthrop Shaw Pittman LLP have been enlisted as financial and legal advisors, respectively, for the transaction.

In other recent developments, Clearwater Paper reported an adjusted EBITDA of $61.5 million for the first quarter of 2024, exceeding RBC Capital Markets' estimate. The company also announced net sales of $496 million, largely due to significant contributions from its tissue business.

Furthermore, Clearwater Paper disclosed a $23 million investment in a new facial tissue converting line at its Shelby, North Carolina plant.

InvestingPro Insights

Clearwater Paper's (NYSE:CLW) recent maneuvers in the market are drawing attention, and the insights from InvestingPro shed additional light on the company's financial health and investor sentiment. The company's market capitalization stands at a robust $804.74 million, while its current P/E ratio is a modest 8.12, suggesting a potentially undervalued stock in comparison to industry peers. This is further supported by a strong free cash flow yield, as indicated by one of the InvestingPro Tips, which suggests the valuation implies a compelling investment opportunity.

Another InvestingPro Tip highlights that management has been aggressively buying back shares, a move that often signals confidence in the company's future and can be a positive for stock prices. Furthermore, while the stock has experienced significant volatility with a notable drop over the past week, it has also seen a substantial price uptick over the last six months, with a 47.64% return, which could indicate a trend of recovery and growth.

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Investors considering Clearwater Paper will find that there are 10 additional InvestingPro Tips available that could provide a more nuanced understanding of the company's performance and potential. These tips, combined with the real-time metrics from InvestingPro, offer a comprehensive toolkit for those looking to make an informed investment decision.

As the company navigates the uncertainties in the Solid Bleached Sulphate market, these InvestingPro insights serve as a valuable resource for stakeholders to gauge the company's strategic positioning and market dynamics.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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