Core Viewpoint - Karat Packaging Inc. has relocated its subsidiary Lollicup USA Inc.'s headquarters from Chino, California to Rockwall, Texas, aiming to enhance operational efficiency and customer service capabilities [1][2]. Company Overview - Karat Packaging Inc. operates through its wholly owned subsidiary, Lollicup USA Inc., which specializes in distributing and manufacturing disposable foodservice products for restaurants and foodservice settings across the U.S. [4]. - The product range includes food containers, bags, tableware, cups, lids, cutlery, straws, and eco-friendly options under the Karat Earth® line, which focuses on sustainability [4]. Operational Changes - The new facility in Rockwall is the largest among the company's 11 operating locations, featuring a 500,000 square-foot manufacturing and distribution center [2]. - The relocation is intended to create a more streamlined environment, improving coordination between manufacturing and distribution teams, and allowing for future growth [2]. Impact on Existing Operations - The relocation will not affect existing operations or employees in California, as the two warehouse facilities in Chino will continue to serve as essential hubs for inventory management and distribution [3].

Core Insights - Investors are increasingly turning to dividend-yielding stocks during market turbulence and uncertainty, as these companies typically have high free cash flows and offer substantial dividend payouts [1] Group 1: High-Yielding Stocks in the Industrials Sector - United Parcel Service Inc (NYSE:UPS) has a dividend yield of 7.80%. Citigroup analyst Ariel Rosa maintained a Buy rating but reduced the price target from $114 to $112, with an accuracy rate of 68%. UBS analyst Thomas Wadewitz also maintained a Buy rating, cutting the price target from $118 to $110, with an accuracy rate of 72%. UPS is set to release its third-quarter 2025 results on October 28 [7] - Karat Packaging Inc (NASDAQ:KRT) has a dividend yield of 7.35%. Truist Securities analyst Jake Bartlett maintained a Hold rating and increased the price target from $28 to $31, with an accuracy rate of 66%. William Blair analyst Ryan Merkel downgraded the stock from Outperform to Market Perform, with an accuracy rate of 65%. KRT posted better-than-expected quarterly earnings on August 7 [7] - Robert Half Inc (NYSE:RHI) has a dividend yield of 7.26%. Truist Securities analyst Tobey Sommer maintained a Buy rating but cut the price target from $55 to $50, with an accuracy rate of 71%. JP Morgan analyst Andrew Steinerman maintained a Neutral rating and reduced the price target from $47 to $45, with an accuracy rate of 73%. RHI will release its third-quarter 2025 earnings results on October 22 [7]

Core Insights - During market turbulence, investors often seek dividend-yielding stocks, which typically have high free cash flows and offer substantial dividends [1] Group 1: High-Yielding Stocks in the Industrials Sector - United Parcel Service Inc (NYSE:UPS) has a dividend yield of 7.80%. Citigroup analyst Ariel Rosa maintained a Buy rating but reduced the price target from $114 to $112, with an accuracy rate of 68%. UBS analyst Thomas Wadewitz also maintained a Buy rating, cutting the price target from $118 to $110, with an accuracy rate of 72%. UPS is set to release its third-quarter 2025 results on October 28 [7] - Karat Packaging Inc (NASDAQ:KRT) has a dividend yield of 7.35%. Truist Securities analyst Jake Bartlett maintained a Hold rating and increased the price target from $28 to $31, with an accuracy rate of 66%. William Blair analyst Ryan Merkel downgraded the stock from Outperform to Market Perform, with an accuracy rate of 65%. The company reported better-than-expected quarterly earnings on August 7 [7] - Robert Half Inc (NYSE:RHI) has a dividend yield of 7.26%. Truist Securities analyst Tobey Sommer maintained a Buy rating but cut the price target from $55 to $50, with an accuracy rate of 71%. JP Morgan analyst Andrew Steinerman maintained a Neutral rating and reduced the price target from $47 to $45, with an accuracy rate of 73%. Robert Half will release its third-quarter 2025 earnings results on October 22 [7]

Core Insights - The article compares two companies in the Containers - Paper and Packaging sector: Karat Packing (KRT) and Packaging Corp. (PKG), focusing on which stock may be undervalued [1] Valuation Metrics - Both KRT and PKG have a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions and improving earnings outlooks [3] - KRT has a forward P/E ratio of 14.52, while PKG has a forward P/E of 20.12 [5] - KRT's PEG ratio is 1.20, compared to PKG's PEG ratio of 1.22, suggesting KRT may offer better value considering expected EPS growth [5] - KRT's P/B ratio is 2.95, while PKG's P/B ratio is 4.04, indicating KRT is more favorably valued in terms of market value versus book value [6] - Based on these valuation metrics, KRT holds a Value grade of B, while PKG has a Value grade of C, suggesting KRT is the superior value option [6]

Core Insights - The current equity market presents challenges in identifying growth stocks at reasonable prices, with the S&P 500 index reflecting this trend [1] Group 1: Market Analysis - The equity market is characterized by difficulty in finding growth stocks that are reasonably priced [1] - TQP Research adopts a value-oriented investment approach, focusing on long-term success criteria established by renowned investors [1] Group 2: Investment Focus - Investment topics include market analysis, macroeconomic trends, large-cap blue chip companies, and undervalued micro-cap and small-cap stocks [1] - TQP Research emphasizes technology and market news as part of its investment strategy [1] Group 3: Community Engagement - TQP Research actively engages with the community and encourages questions and ideas from members [1]

Group 1 - The current equity market presents challenges in finding growth stocks at reasonable prices, with the S&P 500 index trading at elevated levels [1] - TQP Research employs a value-oriented investment approach, focusing on long-term success criteria established by renowned investors like Warren Buffett and Charlie Munger [1] - Investment topics covered by TQP Research include market analysis, macroeconomic trends, large-cap blue chip companies, and undervalued micro-cap and small-cap stocks [1] Group 2 - TQP Research actively engages with the community, encouraging questions and ideas from members [1]

Core Insights - During market turbulence, investors often seek dividend-yielding stocks, which typically have high free cash flows and offer substantial dividends [1] Group 1: High-Yielding Stocks in the Industrials Sector - Karat Packaging Inc. (KRT) has a dividend yield of 7.46%. Analyst Jake Bartlett from Truist Securities maintained a Hold rating and raised the price target from $28 to $31, with an accuracy rate of 68%. Analyst Ryan Merkel from William Blair downgraded the stock from Outperform to Market Perform, with an accuracy rate of 66%. Recent news indicates that Karat Packaging posted better-than-expected quarterly earnings [7] - United Parcel Service, Inc. (UPS) has a dividend yield of 7.70%. Analyst Ken Hoexter from B of A Securities downgraded the stock from Neutral to Underperform, cutting the price target from $91 to $83, with an accuracy rate of 61%. Analyst Ariel Rosa from Citigroup maintained a Buy rating but lowered the price target from $127 to $114, with an accuracy rate of 67%. Recent news includes an expanded agreement between UPS and American Express to support small businesses [7] - Copa Holdings, S.A. (CPA) has a dividend yield of 5.54%. Analyst Savanthi Syth from Raymond James maintained a Strong Buy rating and increased the price target from $147 to $150, with an accuracy rate of 67%. Analyst Stephen Trent from Citigroup maintained a Buy rating with a price target of $159, with an accuracy rate of 64%. Recent news shows that Copa Holdings posted mixed quarterly results [7]

Company Overview - Karat Packaging Inc. is a specialty distributor and manufacturer of disposable foodservice products and related items, primarily serving national and regional restaurants and foodservice settings across the United States [3] - The product range includes food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and other items [3] - The company offers an eco-friendly product line called Karat Earth®, which focuses on sustainability and is made from renewable resources [3] - Customized solutions are also provided, including new product development, design, printing, and logistics services [3] Recent Developments - Alan Yu, the CEO of Karat Packaging Inc., will participate in Lake Street Capital Market's 9th Annual Best Ideas Growth (BIG9) Conference in New York on September 11, 2025 [1] - Management will conduct one-on-one meetings with investors during the conference [1]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents Karat Packaging Inc.'s unaudited condensed consolidated financial statements and notes for interim periods [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20(UNAUDITED)) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :------------------ | | Total Assets | $320,963 | $294,522 | | Total Liabilities | $158,257 | $132,323 | | Total Stockholders' Equity | $162,706 | $162,199 | | Current Assets | $186,251 | $160,997 | | Current Liabilities | $69,498 | $46,447 | | Inventories | $88,779 | $70,722 | | Accounts Receivable, net | $36,385 | $26,736 | | Accounts Payable | $33,160 | $17,831 | | Related Party Payable | $7,974 | $3,130 | [Condensed Consolidated Statements of Income (Unaudited)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20(UNAUDITED)) | Metric (in thousands, except per share data) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net sales | $123,986 | $112,600 | $227,610 | $208,213 | | Cost of goods sold | $74,879 | $69,193 | $137,741 | $127,204 | | Gross profit | $49,107 | $43,407 | $89,869 | $81,009 | | Operating income | $16,550 | $11,115 | $24,370 | $19,191 | | Net income | $11,052 | $9,227 | $17,867 | $15,703 | | Basic earnings per share | $0.55 | $0.46 | $0.87 | $0.76 | | Diluted earnings per share | $0.54 | $0.45 | $0.86 | $0.76 | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20(UNAUDITED)) | Metric (in thousands) | January 1, 2025 | June 30, 2025 | | :-------------------- | :-------------- | :------------ | | Total Stockholders' Equity | $162,199 | $162,706 | **Key Changes (Six Months Ended June 30, 2025):** * Cash dividends declared: ($18,048) (sum of $9,017 and $9,031) * Net income attributable to Karat Packaging Inc.: $17,343 (sum of $6,409 and $10,934) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $17,476 | $20,254 | | Net cash provided by (used in) investing activities | $1,164 | ($8,467) | | Net cash used in financing activities | ($19,675) | ($15,552) | | Net decrease in cash and cash equivalents | ($1,035) | ($3,765) | | Cash paid for income taxes | $5,491 | $3,315 | | Cash paid for interest | $948 | $1,040 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. Nature of Operations](index=12&type=section&id=1.%20Nature%20of%20Operations) - Karat Packaging Inc. (KRT) is a manufacturer and distributor of single-use disposable products for the restaurant and foodservice industries, including plastic, paper, biopolymer-based, and compostable forms[20](index=20&type=chunk) - The company offers customized solutions such as new product design, custom printing, distribution of specialty food and beverage products, and logistics services[20](index=20&type=chunk) - Products are supplied to national and regional distributors, restaurant chains, supermarkets, and small businesses, with manufacturing and distribution centers across the U.S.[21](index=21&type=chunk)[22](index=22&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The unaudited condensed consolidated financial statements are prepared in accordance with US GAAP for interim financial information[23](index=23&type=chunk) - The company consolidates its wholly-owned subsidiaries and Global Wells Investment Group, a variable interest entity where Karat Packaging is the primary beneficiary[25](index=25&type=chunk)[34](index=34&type=chunk) - Revenue is primarily generated from product sales to chains, distributors, online, and retail customers, recognized upon transfer of control; logistics services revenue is recognized over time[37](index=37&type=chunk)[41](index=41&type=chunk)[43](index=43&type=chunk) Fair Value Measurements (in thousands) | Category | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Level 1 (Dec 31, 2024) | Level 2 (Dec 31, 2024) | | :------- | :---------------------- | :---------------------- | :--------------------- | :--------------------- | | Cash equivalents | $3,479 | $16,346 | $725 | $22,525 | | Short-term investments | — | $26,443 | — | $28,343 | | Publicly-traded equity securities | — | — | $31 | — | - The company adopted ASU 2023-07 (Segment Reporting) for its annual period beginning January 1, 2024, and interim period beginning January 1, 2025, requiring enhanced disclosure of significant expenses[53](index=53&type=chunk) [3. Inventories](index=17&type=section&id=3.%20Inventories) | Inventory Category (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :-------------- | :---------------- | | Raw materials | $4,325 | $6,640 | | Semi-finished goods | $1,733 | $1,885 | | Finished goods | $83,421 | $62,837 | | Subtotal | $89,479 | $71,362 | | Less: inventory reserve | ($700) | ($640) | | **Total inventories** | **$88,779** | **$70,722** | [4. Property and Equipment](index=18&type=section&id=4.%20Property%20and%20Equipment) | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :------------------ | | Machinery and equipment | $66,203 | $66,928 | | Leasehold improvements | $19,212 | $19,193 | | Vehicles | $8,860 | $8,395 | | Furniture and fixtures | $1,015 | $1,015 | | Building | $38,779 | $38,779 | | Land | $11,907 | $11,907 | | Computer hardware and software | $113 | $94 | | Construction in progress | $256 | $431 | | Less: accumulated depreciation and amortization | ($62,850) | ($58,760) | | **Total property and equipment, net** | **$83,495** | **$87,982** | - Total depreciation and amortization expense for the six months ended June 30, 2025, was **$5,353,000** (**$2,270,000** in G&A and **$3,083,000** in COGS)[59](index=59&type=chunk) [5. Goodwill](index=18&type=section&id=5.%20Goodwill) | Goodwill (in thousands) | December 31, 2024 | June 30, 2025 | | :---------------------- | :---------------- | :------------ | | Balance | $3,510 | $3,510 | | Goodwill acquired | — | — | [6. Line of Credit](index=18&type=section&id=6.%20Line%20of%20Credit

Company Performance - Karat Packing (KRT) reported quarterly earnings of $0.57 per share, missing the Zacks Consensus Estimate of $0.60 per share, but showing an increase from $0.49 per share a year ago, resulting in an earnings surprise of -5.00% [1] - The company posted revenues of $123.99 million for the quarter ended June 2025, slightly missing the Zacks Consensus Estimate by 0.01%, and an increase from $112.6 million year-over-year [2] - Over the last four quarters, Karat Packing has surpassed consensus EPS estimates only once [2] Stock Outlook - The stock has underperformed the market, losing about 10.9% since the beginning of the year, while the S&P 500 gained 7.9% [3] - The current consensus EPS estimate for the coming quarter is $0.45 on revenues of $125 million, and for the current fiscal year, it is $1.59 on revenues of $462 million [7] Industry Context - The Containers - Paper and Packaging industry, to which Karat Packing belongs, is currently ranked in the bottom 21% of over 250 Zacks industries, indicating a challenging environment [8] - Empirical research suggests that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]