Karat Packaging Stock Dips 5% Since Reporting Q4 Earnings Miss

Shares of Karat Packaging, Inc. KRT have lost 5% since it reported lower-than-expected fourth-quarter 2024 earnings per share (EPS) on March 13, 2025. The quarterly adjusted EPS of 29 cents missed the Zacks Consensus Estimate of 37 cents by a margin of 21.6%. Earnings, however, improved 21% year over year.

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Including one-time items, EPS was 28 cents compared with the year-ago quarter’s 19 cents.

Karat Packaging Sees Volume Growth in Q4

Total revenues were $101.6 million in the quarter, which missed the Zacks Consensus Estimate of $102.3 million. The year-ago quarter included a favorable impact from the adjustment of $4.8 million of online sales platform fees for the first nine months in 2023. 

Revenues were up 6% year over year aided by volume growth of 14% and a change in product mix, partially offset by a decrease of 4% in online sales platform fees reflecting the favorable impact in the prior-year quarter, as well as a 6% unfavorable year-over-year pricing comparison.

KRT’s Margins Expand Y/Y in Q4

The cost of sales increased 0.5% year over year to $61.8 million. The figure included an additional import duty charge of $0.6 million on paper shopping bags. Product costs increased attributed to volume growth, partially offset by a favorable impact from reduced vendor pricing, a stronger United States dollar against the New Taiwan Dollar and an increase in imports as a percentage of the total product mix. Ocean freight costs were higher, due to an increase in import volume along with higher freight container rates.

Gross profit rose 17% year over year to $39.8 million. The gross margin was 39.2%, a 350-basis point expansion from the year-ago quarter. Gross margin benefited from lower product costs as a percentage of net sales in the quarter reflecting more favorable vendor pricing, foreign currency impact and product mix. However, higher freight and duty costs somewhat offset these gains. 

Operating expenses were $32.5 million, a 10% increase compared with $29.5 million in the year-ago quarter. Adjusted EBITDA rose 32% year over year to $11.3 million. The adjusted EBITDA margin was 11.1% compared with 9% in the fourth quarter of 2023.

Karat Packaging’s Cash Position at 2024-End

Karat Packaging reported cash and cash equivalents of $21.6 million as of Dec. 31, 2024, up from $23.1 million as of Dec. 31, 2023. The company generated $48 million of cash flow from operations in 2024 compared with $53 million in the prior year.

KRT’s Performance in 2024

Karat Packaging’s 2024 adjusted EPS of $1.64 came in 10% lower than the prior year’s figure of $1.83. The figure missed the Zacks Consensus Estimate of $1.66.

Including one-time items, EPS was $1.49 compared with $1.63 in 2023.

KRT’s revenues increased 4.2% year over year to $423 million, in line with the Zacks Consensus Estimate. The increase primarily reflected higher volumes, a change in product mix and an increase of $4.6 million in online sales platform fees due to higher sales within the e-commerce channel in the current year, as well as higher logistics and shipping revenues. However, this was offset by unfavorable pricing.

Karat Packaging’s Guidance for Q1 & 2025

KRT anticipates year-over-year sales growth in the range of 6-8% in the first quarter of 2025. The gross margin is projected between 37% and 39% in the quarter. Adjusted EBITDA margin is likely to be between 9% to 11%.

For 2025, sales growth is forecast to be in the band of 9-11% from the previous year. The targeted gross margin for the year is between 36% and 48%. Adjusted EBITDA margin is expected in the low to mid-double-digits.

KRT Stock’s Price Performance

Shares of the company have gained 3.3% in the past year compared with the industry’s 2.6% growth.

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KRT’s Zacks Rank

Karat Packaging currently carries a Zacks Rank #4 (Sell). 

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Performances of Other Packaging Stocks

AptarGroup, Inc. ATR reported fourth-quarter 2024 adjusted EPS of $1.52, which beat the Zacks Consensus Estimate of $1.26. The bottom line increased 27% year over year from $1.20 per share (including comparable exchange rates). 

ATR’s total revenues increased 1.1% year over year to $848 million. However, the reported figure missed the Zacks Consensus Estimate of $858 million.

Packaging Corporation of America PKG posted adjusted EPS of $2.47 in the fourth quarter of 2024, which missed the Zacks Consensus Estimate of $2.51 by a margin of 2%. The bottom line grew 16% year over year. The upside was driven by higher prices and mix, improved volume in both segments and lower freight and logistics expenses. However, these gains were somewhat offset by an increase in operating expenses, scheduled maintenance outage expenses, depreciation expenses and other expenses.

Revenues in the fourth quarter rose 10.7% year over year to $2.15 billion due to higher volumes and price/mix in both segments. The top line beat the Zacks Consensus Estimate of $2.13 billion.

Amcor Plc AMCR reported second-quarter fiscal 2025 (ended Dec. 31, 2024) adjusted earnings per share of 16 cents, which met the Zacks Consensus Estimate. The company reported earnings of around 16 cents per share in the year-ago quarter. Gains from improved volumes, continued strong cost performance and benefits from restructuring initiatives were offset by unfavorable impacts of price/mix. Amcor’s revenues dipped 0.3% year over year to $3.24 billion, which missed the Zacks Consensus Estimate of $3.44 billion.

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