Why Ranpak Holdings Stock Dropped 23% on Thursday

What happened

Ranpak (PACK -26.97%) shareholders saw red on Thursday as the stock dove, trading 23% lower as of 1 p.m. ET compared to a modest increase in the S&P 500. That slump added to big short-term declines for the packaging supplies and equipment specialist. Its shares are down by more than 80% so far in 2022.

This latest plunge was sparked by a series of cautious comments from management about the company’s growth outlook.

So what

Ranpak announced its second-quarter results before the market opened, and the update wasn’t what investors were hoping to see. While the company returned to sales growth on a constant-currency basis, its net revenue fell and its expenses soared.

Executives highlighted several pressures impacting results, including inflation, low consumer confidence, and weakening e-commerce spending. “The environment has gotten more challenging and the economic outlook has deteriorated,” CEO Omar Asali said in a press release. Ranpack’s net losses doubled year over year to $11 million. Management said consumers appear to be prioritizing experiences over the type of merchandise purchases that lift demand for its packing machines.

Now what

Ranpak executives said they are seeing a slowdown in cost increases, including stable prices for paper in the key U.S. market. While that is encouraging, the company isn’t optimistic about a quick return to expanding earnings. “The weaker outlook makes us more cautious on price and cost recapture,” executives said.

As a result, investors reduced their profit expectations for 2022 and sent the stock lower on Thursday. Ranpak still has a bright long-term growth outlook as e-commerce continues to expand its share of the total retailing space. That trend, though, seems set to take a pause in 2022 after two straight years of big gains.

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