Stifel maintains Buy on Karat Packaging stock with $36 target

On Friday, Stifel analysts upheld their Buy rating and $36.00 price target for Karat Packaging Inc (NASDAQ:KRT), following the company’s announcement of its fourth-quarter earnings. Karat Packaging (NYSE:PKG), currently valued at $593 million by market cap, reported a 6.3% year-over-year increase in revenue to $101.6 million for the fourth quarter of 2024, driven by strong distributor volumes. The company’s adjusted EBITDA (AEBITDA) margins for the same quarter were 11.1%, a rise of 210 basis points from the previous year, although this fell short of the consensus expectation of 12.5%. According to InvestingPro analysis, the company maintains a GOOD financial health score, supported by strong profitability metrics and a notable 7.94% dividend yield.

The company’s guidance for the fiscal year 2025 is optimistic, projecting revenue growth of 9% to 11%, primarily from volume increases, compared to a consensus estimate of 7.4% growth. The gross profit dollars’ midpoint forecast aligns with the consensus of $172 million, but with slightly lower margins, indicating some caution regarding the impact of tariffs. With a current gross profit margin of 38.07% and P/E ratio of 20.58, Karat Packaging anticipates AEBITDA margins in the low to mid double-digits, which would result in an approximate AEBITDA of $60 million for FY25, assuming a 13% margin, and is in line with consensus expectations.

For FY25, the company expects capital expenditures to be around $5 million as it adds vehicles to support its projected above-average double-digit growth. With a strong current ratio of 3.12, the company appears well-positioned to fund these investments. The analyst’s commentary highlighted Karat Packaging’s ongoing market share expansion, as the company aids its customers in reducing the number of suppliers, cutting costs, and streamlining their supply chains. For detailed insights and additional metrics, including the comprehensive Pro Research Report covering Karat Packaging, visit InvestingPro.

In other recent news, Karat Packaging Inc. reported its fourth-quarter 2024 financial results, which fell short of analyst expectations. The company announced earnings per share (EPS) of $0.29, missing the forecasted $0.38. Revenue was slightly below projections, coming in at $101.65 million against an anticipated $102.27 million. Despite these misses, Karat Packaging experienced a 6.3% increase in revenue year-over-year, supported by a 13.9% rise in sales volume. The company’s net income saw a significant boost, climbing 40.3% to $5.9 million. Karat Packaging also highlighted its operational expansions, including a new distribution center, as part of its growth strategy. Additionally, the company noted that eco-friendly product sales now make up 34.5% of total sales, reflecting a growing trend towards sustainable products. Looking forward, Karat Packaging projects a revenue growth rate of 9-11% for 2025, with strategic expansions and product innovations driving this anticipated growth.

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