Impact on Operating Margins
KPâŻTissueâs $15âmillion Memphis expansion is being positioned as a âcostâefficiency hubâ that will consolidate U.S. production, reduce logistics overlap, and enable a higherâmargin product mix. Managementâs commentary in the Q2â2025 release highlights a projected 2â4âŻpercentageâpoint lift in operating margin beginning in Q4âŻ2025, with incremental improvements as the new facilities reach full capacity. The added capacity also supports the companyâs strategy to capture a larger share of the growing U.Sâconsumer tissue market, which should bolster topâline growth while the fixedâcost base is spread over a larger volume base, further strengthening margins in the next two to three quarters.
Trading Implications
From a fundamentals standpoint, the margin expansion narrative dovetails with a strong earnings beat and a 70âpoint sentiment score, suggesting a bullish bias. Technically, KPâŻTissue is trading above its 50âday moving average and has recently broken a shortâterm resistance level around $22.50, with the RSI hovering near 60âindicating momentum without being overbought. Given the expected margin uplift, the stock appears positioned for a midâterm upside of 8â12âŻ% if the company delivers the anticipated efficiency gains.
Actionable Insight: Consider initiating a long position with a modest stopâloss just below the 50âday MA (~$21.80) to capture the anticipated marginâdriven upside. Monitor the upcoming Q4â2025 earnings release for the firstâquarter impact of the Memphis plant; a confirmed improvement in operating margin will likely validate the bullish case and provide a catalyst for further price appreciation. If the margin improvement underâdelivers, consider a protective put or a reduced position as the marginâgrowth narrative falters.