VRTV Stock Price Increased Over 80% Intraday: Why It Happened

By Amit Chowdhry ● March 3, 2021
  • The stock price of Veritiv Corp (NYSE: VRTV) increased by over 80% during intraday trading. This is why it happened.

The stock price of Veritiv Corp (NYSE: VRTV) – a full-service provider of business-to-business distribution solutions – increased by over 80% during intraday trading (previous close of $25.24 and day high of $45.50). Investors responded to the company announcing its financial results for the fourth quarter and full-year ended December 31, 2020.

For the 3 months ended December 31, 2020, compared to the three months ended December 31, 2019:

– Net sales were $1.6 billion, a decrease of 10.5% from the prior year.

– Income before income taxes was $41.0 million, compared to $3.9 million in the prior year.

– Net income was $32 million, compared to $3.4 million in the prior year. Net restructuring charges were $11.8 million in the fourth quarter of 2020 compared to $11.9 million in the prior year.

– Basic and diluted earnings per share were $2.01 and $1.90, respectively, compared to $0.21 and $0.21, respectively, in the prior year.

– Adjusted EBITDA was $61.7 million, an increase of 30.7% from the prior year.

– Adjusted EBITDA as a percentage of net sales was 3.8%, an increase of 120 basis points from the prior year.

For the year ended December 31, 2020, compared to the year ended December 31, 2019:

– Net sales were $6.3 billion, a decrease of 17.2% from the prior year.

– Income (loss) before income taxes was income of $43.0 million, compared to loss of $(28.8) million in the prior year.

– Net income was $34.2 million, compared to net loss of $(29.5) million in the prior year. Net restructuring charges were $52.2 million in 2020 compared to $28.8 million in the prior year.

– Basic and diluted earnings per share were $2.14 and $2.08 compared to a loss for both basic and diluted earnings per share of $(1.84) in the prior year.

– Adjusted EBITDA was $187.6 million, an increase of 20.3% from the prior year.

– Adjusted EBITDA as a percentage of net sales was 3.0%, an increase of 100 basis points from the prior year.

For the year ended December 31, 2020, the net cash provided by operating activities was $289.2 million and free cash flow was $265.6 million.

2021 Guidance

The company’s 2020 Restructuring Plan — as announced in July and amended in December — remains on schedule and on target. And the company expects full year 2021 revenue to be relatively flat to prior year with performance varying by segment. And during the first half of the year, revenues are expected to be unfavorably impacted by the negative effects of the COVID-19 pandemic across all segments, with the exception of Packaging. However, the Company expects a broader economic rebound in the second half of the year.

Based on these factors, the company is expecting income before taxes for full year 2021 to be in the range of $60 to $80 million and Adjusted EBITDA to be in the range of $195 to $205 million. The company’s 2021 free cash flow is expected to be at least $75 million, driven by earnings and continuing working capital discipline. And the company said it is going to continue to invest in business growth and expect capital expenditures for the year to be approximately $35 million.

Stock Repurchase Program

The company had also announced today that the Board of Directors has approved a $50 million stock repurchase program. And under the stock repurchase authorization, the company may, from time to time, purchase shares of its common stock through open market transactions, privately negotiated transactions, forward, derivative, or accelerated repurchase transactions, tender offers or otherwise, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934 as amended. 

And the $50 million stock repurchase authorization does not obligate the company to purchase any shares. Plus the Company may commence such repurchases immediately, subject to compliance with applicable securities laws. Or Veritiv may enter into a pre-arranged stock trading plan in accordance with the guidelines specified under Rule 10b5-1 to effectuate the company’s new stock repurchase program. 

Veritiv expects to finance any repurchases from a combination of cash on hand and cash provided by operating activities. And the timing and method of any repurchases, which will depend on a variety of factors, including market conditions, are subject to results of operations, financial conditions, cash requirements and other factors. This authorization for the stock repurchase program replaces the $25 million stock repurchase authorization previously approved by the Board of Directors in March 2020 and may be suspended, terminated, increased or decreased by the Board at any time.

KEY QUOTES:

“The combination of Packaging sales growth over prior year and improving core sales trends from the prior two quarters in our other segments led to record net income and Adjusted EBITDA in the fourth quarter. We made significant progress this year towards our vision of being a leading provider of packaging products, services and solutions. Despite the challenging market environment, the fundamentals of our business improved in a step-wise manner, driven by Packaging segment growth and the execution of our multi-year strategy, including our broad-based efficiency programs.”

“Our management team and Board of Directors are committed to initiatives with the highest return on investment, as well as prudent capital management. We believe this stock repurchase program accomplishes both objectives,”

— Sal Abbate, Veritiv Chief Executive Officer

“We generated record cash flow in 2020 due to strong earnings and our ongoing efforts to improve working capital. At the end of December 2020, our net debt to Adjusted EBITDA leverage ratio was 2.1x, down from 4.1x in the prior year.”

— Stephen Smith, Senior Vice President and Chief Financial Officer

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.