Karat Packaging (KRT) Stock Dips on Q2 Earnings & Revenue Miss

Core Insights - Karat Packaging, Inc. (KRT) reported lower-than-expected second-quarter 2024 revenues and earnings per share (EPS), leading to an 8.5% decline in share price since the announcement [1] - The adjusted EPS of 49 cents missed the Zacks Consensus Estimate of 60 cents and represented a 29% year-over-year decline [1][2] - Total revenues increased by 3.5% year-over-year to $112.6 million but fell short of the Zacks Consensus Estimate of $114 million [2] Financial Performance - Including one-time items, EPS was 45 cents, down from 53 cents in the same quarter last year [2] - The cost of sales rose 3.5% year-over-year to $69 million, while gross profit increased by 3.7% to $43 million, maintaining a gross margin of 38.5% [3] - Operating expenses increased to $32.3 million from $28.5 million year-over-year, driven by higher online sales platform fees, rent, warehouse expenses, and stock compensation [4] Operational Metrics - Adjusted EBITDA declined 26% year-over-year to $15.7 million, with an adjusted EBITDA margin of 13.9%, down from 19.4% in the second quarter of 2023 [5] - Cash and cash equivalents decreased to $19.3 million as of June 30, 2024, from $23 million at the end of 2023, with cash flow from operations at $20 million compared to $31 million in the prior year [6] Future Guidance - For Q3 2024, KRT anticipates year-over-year sales growth in the mid to high-single-digit range and projects a gross margin between 38% and 39% [7] - For the full year 2024, sales growth is expected to be in the mid-single digits, with a targeted gross margin of 38% to 40% [7] Market Performance - Year-to-date, KRT shares have gained 3.1%, while the industry has seen a growth of 9.3% [8]