Mercer International (MERC) AI Stock Analysis

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Mercer International

(NASDAQ:MERC)

51Neutral

Mercer International's overall stock score reflects significant financial challenges, including declining revenues and high leverage, which are major concerns. Technical analysis indicates bearish momentum, reinforcing a cautious outlook. Despite these challenges, the company's strong liquidity position and high dividend yield provide some positive aspects, making it a complex investment scenario.

Mercer International (MERC) vs. S&P 500 (SPY)

Market Cap

$238.06M

Dividend Yield8.9%

Average Volume (3M)493.92K

Price to Earnings (P/E)―

Beta (1Y)1.07

Revenue Growth-1.37%

EPS Growth60.42%

CountryUS

Employees3,580

SectorBasic Materials

Sector Strength63

IndustryPaper, Lumber & Forest Products

Share Statistics

EPS (TTM)-0.33

Shares Outstanding66,870,770

10 Day Avg. Volume631,231

30 Day Avg. Volume493,920

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap7.35

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit9.24

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$4.67

Price Target Upside30.81% Upside

Rating ConsensusHold

Number of Analyst Covering3

Mercer International Business Overview & Revenue Model

Company DescriptionMercer International Inc., together with its subsidiaries, manufactures and sells northern bleached softwood kraft (NBSK) pulp in Europe, the United States, Asia, and internationally. The company operates through two segments, Pulp and Wood Products. It also generates and sells green energy produced from biomass cogeneration power plant to third party utilities. In addition, the company manufactures, distributes, and sells lumber and other wood residuals. Further, it produces NBSK pulp primarily from wood chips, pulp logs, and sawlogs; carbon neutral or green energy using carbon-neutral bio-fuels, such as black liquor and wood waste; and tall oil for use as a chemical additive and green energy source. The company sells its pulp to tissue, specialty paper, and printing and writing paper, and other manufacturers; and lumber products to distributors, construction firms, secondary manufacturers, retail yards, and home centers. Mercer International Inc. was founded in 1968 and is headquartered in Vancouver, Canada.

How the Company Makes MoneyMercer International generates revenue primarily through the sale of its pulp and wood products. The company's key revenue streams include the production and distribution of NBSK pulp, which is heavily utilized in the paper industry for making tissue, printing and writing papers, and specialty papers. Furthermore, Mercer International produces lumber and other wood products, which contribute to its earnings by serving the construction and industrial markets. The company benefits from strategic partnerships and long-term contracts with major pulp and paper manufacturers globally, which provide stable and recurring revenue. Additionally, Mercer International leverages its operational efficiencies and technological advancements in its production processes to maintain competitive pricing and enhance profitability.

Mercer International Financial Statement Overview

Summary

Mercer International faces challenges with declining revenues and profitability, as shown by negative margins and net income. The balance sheet indicates high leverage, raising financial risk concerns, while improvements in cash flow generation provide some optimism. The company needs to address its revenue decline and manage leverage to enhance financial stability.

Income Statement

Neutral

The income statement shows declining revenue from the previous year, with a notable decrease in gross profit margin from positive to negative. The net profit margin is also negative, indicating a loss. The EBIT and EBITDA margins have improved slightly in the TTM period compared to the previous year, but still reflect a challenging operating environment.

Balance Sheet

Neutral

The balance sheet reveals a relatively high debt-to-equity ratio, indicating significant leverage. The equity ratio has decreased over the years, suggesting reduced equity backing for assets. Return on Equity (ROE) is negative due to net losses, raising concerns about profitability. However, total assets have increased, providing some balance sheet stability.

Cash Flow

Neutral

Cash flow analysis shows a positive free cash flow in the TTM period, an improvement from previous losses, indicating better cash management. Operating cash flow to net income ratio is strong, highlighting efficient cash generation despite net losses. However, free cash flow growth remains a concern due to historical volatility.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.04B	1.99B	2.28B	1.80B	1.42B
	Gross Profit
189.36M	-31.86M	498.20M	425.52M	130.60M
	EBIT
15.01M	-188.77M	392.37M	346.58M	63.73M
	EBITDA
15.01M	-9.07M	560.96M	478.78M	192.65M
	Net Income Common Stockholders
-85.14M	-242.06M	247.04M	170.99M	-17.23M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
184.93M	313.99M	354.03M	345.61M	361.10M
	Total Assets
2.26B	2.66B	2.73B	2.35B	2.13B
	Total Debt
1.49B	1.63B	1.36B	1.24B	1.20B
	Net Debt
1.31B	1.31B	1.00B	898.51M	835.46M
	Total Liabilities
1.83B	2.03B	1.89B	1.66B	1.53B
	Stockholders Equity
429.77M	635.41M	838.78M	694.02M	601.03M
Cash Flow		Free Cash Flow
5.89M	-205.33M	181.42M	21.39M	-37.60M
	Operating Cash Flow
90.20M	-69.00M	360.66M	182.21M	41.56M
	Investing Cash Flow
-66.99M	-199.87M	-425.68M	-187.13M	-59.83M
	Financing Cash Flow
-152.78M	228.62M	81.97M	-9.50M	26.32M

Mercer International Technical Analysis

Technical Analysis Sentiment

Negative

Last Price3.57

Price Trends

50DMA

5.54

Negative

100DMA

6.06

Negative

200DMA

6.20

Negative

Market Momentum

MACD

-0.56

Positive

RSI

31.60

Neutral

STOCH

24.77

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MERC, the sentiment is Negative. The current price of 3.57 is below the 20-day moving average (MA) of 4.41, below the 50-day MA of 5.54, and below the 200-day MA of 6.20, indicating a bearish trend. The MACD of -0.56 indicates Positive momentum. The RSI at 31.60 is Neutral, neither overbought nor oversold. The STOCH value of 24.77 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MERC.

Mercer International Risk Analysis

Mercer International disclosed 36 risk factors in its most recent earnings report. Mercer International reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Mercer International Peers Comparison

Overall Rating

UnderperformOutperform

Sector (49)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SLVM	69 Neutral	$2.41B	8.26	31.83%	2.99%	0.91%	22.51%
UFPI	68 Neutral	$5.96B	16.44	11.33%	1.36%	-6.06%	-24.97%
CLW	60 Neutral	$412.41M	33.74	-8.15%	―	-15.03%	-233.06%
RYAM	52 Neutral	$281.69M	―	-10.12%	―	2.20%	34.71%
MERC	51 Neutral	$238.06M	―	-17.96%	8.90%	-1.37%	60.42%
Sector *	49 Neutral	$1.95B	-1.21	-21.28%	3.72%	1.18%	-30.47%
NWGL	34 Underperform	$23.01M	―	-65.63%	―	―	―

* Basic Materials Sector Average

Performance Comparison

MERC

Mercer International

3.76

-6.30

-62.62%

CLW

Clearwater Paper

27.10

-21.09

-43.76%

UFPI

UFP Industries

97.37

-19.39

-16.61%

RYAM

Rayonier Advanced Materials

3.63

-0.96

-20.92%

SLVM

Sylvamo Corp

52.64

-10.63

-16.80%

NWGL

Nature Wood Group Limited Sponsored ADR

1.39

-1.45

-51.06%

Mercer International Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q1-2025)

% Change Since: -15.20%|

Next Earnings Date:Jul 31, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted several operational improvements and strategic initiatives, such as increased lumber production, successful upgrades, and a strong liquidity position. However, the company faced significant challenges, including decreased EBITDA, a consolidated net loss, and the impact of planned downtime. Global economic uncertainties and market challenges in China also posed risks. Despite some positive developments, the balance of these factors suggests a cautious outlook.

Q1-2025 Updates

Positive Updates

Increased Lumber Production

Lumber production was a near record 128 million board feet in Q1, up 12% from Q4 due to seasonal downtime in the fourth quarter.

Successful Woodroom Upgrade

Completion of the woodroom upgrade at Selgar Mill, expected to decrease reliance on sawmill residuals and lower per unit fiber costs.

Stable Fiber Costs in Pulp Segment

Pulp segment had stable fiber costs compared to Q4, with some cost savings in Canada due to improved fiber sourcing strategies.

Lumber Price Increase

Realized lumber prices increased in Q1 compared to Q4 due to higher prices in the U.S. and European markets, driven by reduced supply and steady demand.

Liquidity Position

Liquidity position totaled $471 million, comprised of about $182 million of cash and $289 million of undrawn revolvers.

Negative Updates

EBITDA Decrease

EBITDA was $47 million compared to Q4 EBITDA of $99 million, primarily due to major maintenance downtime at the Selgar mill.

Consolidated Net Loss

Reported a consolidated net loss of $22 million for Q1, or $0.33 per share, compared to a net income of $17 million, or $0.25 per share, in Q4.

Impact of Planned Downtime

22 days of planned downtime in Q1, negatively impacting EBITDA by about $30 million in direct costs and reduced production.

Challenges in China

Softened demand in China with a slowdown in buying, potentially impacting pricing, particularly for hardwood pulp.

Impact of Global Economic Uncertainty

Global economic uncertainty and high interest rates impacting project timelines and market momentum, specifically in mass timber operations.

Company Guidance

In Mercer's First Quarter 2025 earnings call, Richard Short, the CFO, reported a decrease in EBITDA to $47 million from $99 million in Q4 2024, primarily due to 22 days of planned downtime at the Selgar mill, which negatively impacted EBITDA by $30 million. The Pulp segment contributed CAD50 million to EBITDA, while the Solid Wood segment broke even. MBSK prices increased across key markets, with the European price at $1,550 per ton, North American at $1,753, and China's net price at $793. Pulp sales volumes rose by 26,000 tons to 478,000 tons due to sales timing, despite the downtime. Lumber production increased to 128 million board feet, up 12% from Q4, with sales volumes reaching 131 million board feet. Electricity sales remained stable at 235 gigawatt hours, with pricing slightly increasing to $112 per megawatt hour. The company reported a Q1 net loss of $22 million, or $0.33 per share, compared to a $17 million net income in Q4, with cash consumption at $3 million. Capital investments totaled $20 million, with liquidity at $471 million. The Board declared a quarterly dividend of $0.075 per share.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.