Ranpak jumps after teasing ‘transformative-like’ automation deal

Shares of Ranpak (PACK) are soaring on Tuesday after the company said during its earnings conference call that it is “pretty close on signing a multiyear deal one of the largest customers in North America.” Ranpak added that the contract is worth $100M. Craig-Hallum views the imminent order for automation equipment as a near-term catalyst for the shares.

RESULTS: Ranpak reported Q2 losses per share (9c), versus the (6c) Craig-Hallum expected, and Q2 revenue of $92.3M, also below the consensus estimate of $94.3M. Omar Asali, Chairman and Chief Executive Officer, commented, “I am pleased to share we achieved our 8th quarter in a row of volume growth in a challenging environment, driven by our deepening relationships with Enterprise customers in North America where we continue to make strong inroads in Protective and Automation leading me to be more optimistic for the remainder of the year. Global paper volumes increased 5.2% in the quarter and net revenue increased 6.8% year over year, or 3.8% on a constant currency basis, driven by continued strength within North American e-commerce and includes a $1.2 million non-cash reduction for warrants. Uncertainty across the globe weighed on our exclusive distribution channel in the second quarter leading to a less robust May and June globally. In general, industrial activity continues to be subdued but we did see positive volume growth in Cushioning in the quarter in an encouraging sign of a more balanced growth profile outlook among our product lines and improved profitability.”

AUTONOMATION CONTRACT: Alongside earnings for the second quarter, Ranpak said it is close on signing a multiyear deal, worth almost $100M. “We are working and are pretty close on signing a multiyear deal with one of the largest customers in North America where they would be buying equipment from us for the next couple of years that would consume the bulk of our capacity in Connecticut. So, this will be a contract that’s north of $100,000,000 of equipment that we’re working on that we believe we’ll be announcing in the upcoming weeks. And we’ve been working on this for the last number of years. All the testing validation and initial installs are all done. And that is giving us quite a bit of confidence and boost for the second half of the year,” the company said during its earnings conference call.

FANTASTIC SETUP: Craig-Hallum analyst Greg Palm found “a lot more excitement” on Ranpak’s earnings call than the Q2 report would suggest. Management hinted at a “transformative-like” automation deal that could be announced in the coming weeks while the base business should undergo improved profitability in the back half of the year, the analyst tells investors in a research note. Hallum views the imminent multi-year $100M order for automation equipment from a large North American company as near-term catalyst for the shares. It believes Ranpak has a “fantastic setup” in the near term as a result and reiterates a Buy rating on the shares with an $8 price target

PRICE ACTION: In afternoon trading, shares Ranpak has jumped over 21% to $4.30.