Dj Cfo Guo Acquires 2450 Of Karat Packaging Inc >Krt

Foodservice packaging supplier Karat Packaging met Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.1% year on year to $124 million. On the other hand, next quarter’s revenue guidance of $121.2 million was less impressive, coming in 2.6% below analysts’ estimates. Its non-GAAP profit of $0.57 per share was 5% below analysts’ consensus estimates.

Is now the time to buy KRT? Find out in our full research report (it’s free).

Karat Packaging (KRT) Q2 CY2025 Highlights:

• Revenue: $124 million vs analyst estimates of $123.5 million (10.1% year-on-year growth, in line)
• Adjusted EPS: $0.57 vs analyst expectations of $0.60 (5% miss)
• Adjusted EBITDA: $17.69 million vs analyst estimates of $17.6 million (14.3% margin, 0.5% beat)
• Revenue Guidance for Q3 CY2025 is $121.2 million at the midpoint, below analyst estimates of $124.5 million
• Operating Margin: 13.1%, up from 10.3% in the same quarter last year
• Market Capitalization: $513.4 million

StockStory’s Take

Karat Packaging’s second quarter results were met with a negative market reaction as non-GAAP earnings missed Wall Street’s consensus despite revenue aligning with expectations. Management attributed the quarter’s growth to robust sales volumes, notably from large national chain customers and sustained double-digit gains in key markets like California. CEO Alan Yu emphasized that operational efficiency, including domestic manufacturing ramp-up and a shift to first-party e-commerce fulfillment, supported both margin expansion and cost savings. However, Yu noted that foreign currency headwinds and increased import duties, primarily from new tariffs, weighed on profitability.

Looking forward, Karat Packaging’s guidance reflects the impact of continued tariff-related cost pressures and ongoing shifts in its global sourcing strategy. Management pointed to efforts to diversify away from China and Taiwan in favor of other Asian and Latin American suppliers as a key lever to mitigate rising costs. CFO Jian Guo cautioned that gross margins are expected to decline sequentially in the next quarter as higher-cost inventory works through the system but should recover in the fourth quarter as sourcing changes take effect. The company also expects recent price adjustments, along with new business wins, to support sales momentum in the second half of the year.

Key Insights from Management’s Remarks

Management cited sourcing diversification, operational improvements, and sales channel shifts as major contributors to the latest quarter’s performance, while also highlighting the challenges posed by tariffs and currency fluctuations.

• Sourcing diversification underway: Karat Packaging reduced reliance on China to 10% of supply in the quarter, accelerating its shift to vendors in other Asian countries and Latin America to increase supply chain resilience and limit tariff exposure.
• Operational efficiency gains: The company achieved $1 million in shipping and marketing savings by switching providers and focusing on its own e-commerce storefront, which also improved control and margins for online sales.
• Large chain and distributor momentum: Sales to chain accounts and distributors outpaced other segments, driven by new business wins with national chains scheduled to ramp in the second half of the year.
• Tariffs and FX headwinds: Management noted that recent tariffs resulted in higher import duties and ocean freight costs, while unfavorable currency moves (notably the New Taiwan dollar) further increased cost of goods sold.
• Price increases and product mix: Selective price adjustments were implemented, but overall pricing impact was negative this quarter as growth in chain and distributor sales outpaced higher-margin online and retail channels.

Drivers of Future Performance

Management expects tariff costs, sourcing changes, and evolving sales mix to drive results in upcoming quarters, with gross margins under pressure before partial recovery later in the year.

• Tariff-driven margin compression: CFO Jian Guo stated that cost of goods sold will reflect higher tariffs in the third quarter, leading to gross margin pressure. Recovery is expected in the fourth quarter as lower-tariff inventory enters the supply chain.
• Sourcing and cost mitigation: CEO Alan Yu highlighted ongoing vendor diversification and cost negotiations, aiming to offset tariff impacts and currency volatility by sourcing more from countries with lower duties and favorable pricing.
• Sales channel evolution: The company anticipates continued volume growth from national chains and distributors, but expects price realization to stabilize as online sales return to double-digit growth, especially through new platforms like Sysco Market.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the pace and effectiveness of Karat Packaging’s sourcing diversification efforts, (2) the trajectory of gross margin recovery as lower-tariff inventory is sold, and (3) the ramp-up of new business from national chain accounts. The evolution of online sales channels and the impact of additional tariffs or currency movements will also be important markers for tracking execution against the company’s strategy.

Karat Packaging currently trades at $25.55, down from $26.65 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return).

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

Let’s dig into the relative performance of United Rentals and its peers as we unravel the now-completed Q2 specialty equipment distributors earnings season.

Historically, specialty equipment distributors have boasted deep selection and expertise in sometimes narrow areas like single-use packaging or unique lighting equipment. Additionally, the industry has evolved to include more automated industrial equipment and machinery over the last decade, driving efficiencies and enabling valuable data collection. Specialty equipment distributors whose offerings keep up with these trends can take share in a still-fragmented market, but like the broader industrials sector, this space is at the whim of economic cycles that impact the capital spending and manufacturing propelling industry volumes.

The 8 specialty equipment distributors stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 2% while next quarter’s revenue guidance was 2.6% below.

In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.

United Rentals

Owning the largest rental fleet in the world, United Rentals provides equipment rental and related services to construction, industrial, and infrastructure industries.

United Rentals reported revenues of $3.94 billion, up 4.5% year on year. This print exceeded analysts’ expectations by 0.8%. Overall, it was a strong quarter for the company with a solid beat of analysts’ adjusted operating income estimates and full-year EBITDA guidance slightly topping analysts’ expectations.

Interestingly, the stock is up 8.8% since reporting and currently trades at $869.70.

Is now the time to buy United Rentals? Access our full analysis of the earnings results here, it’s free.

Best Q2: Hudson Technologies

Founded in 1991, Hudson Technologies specializes in refrigerant services and solutions, providing refrigerant sales, reclamation, and recycling.

Hudson Technologies reported revenues of $72.85 million, down 3.2% year on year, outperforming analysts’ expectations by 1.7%. The business had a stunning quarter with a solid beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.

The market seems happy with the results as the stock is up 15.5% since reporting. It currently trades at $9.60.

Is now the time to buy Hudson Technologies? Access our full analysis of the earnings results here, it’s free.

Weakest Q2: Karat Packaging

Founded as Lollicup, Karat Packaging distributes and manufactures environmentally-friendly disposable foodservice packaging solutions.

Karat Packaging reported revenues of $124 million, up 10.1% year on year, in line with analysts’ expectations. It was a slower quarter as it posted a significant miss of analysts’ EPS estimates and revenue guidance for next quarter missing analysts’ expectations.

As expected, the stock is down 4.1% since the results and currently trades at $25.55.

Read our full analysis of Karat Packaging’s results here.

Herc

Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings provides equipment rental and related services to a wide range of industries.

Herc reported revenues of $1.00 billion, up 18.2% year on year. This number topped analysts’ expectations by 6.9%. However, it was a slower quarter as it recorded full-year revenue guidance missing analysts’ expectations significantly and full-year EBITDA guidance missing analysts’ expectations significantly.

Herc had the weakest full-year guidance update among its peers. The stock is down 26% since reporting and currently trades at $111.09.

Read our full, actionable report on Herc here, it’s free.

Alta

Founded in 1984, Alta Equipment Group is a provider of industrial and construction equipment and services across the Midwest and Northeast United States.

Alta reported revenues of $481.2 million, down 1.4% year on year. This print beat analysts’ expectations by 0.6%. Overall, it was an exceptional quarter as it also logged an impressive beat of analysts’ EPS estimates and an impressive beat of analysts’ adjusted operating income estimates.

The stock is up 6.4% since reporting and currently trades at $7.60.

Read our full, actionable report on Alta here, it’s free.

Market Update

In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.