GET DAILY SIGNALSKarat Packaging (KRT) Reports +8% Sales Growth in Q3 but Sees Margin Compression
Key Takeaways
- Karat Packaging reported third-quarter 2026 net sales of $134.7 million, up roughly 8% from $124.5 million a year earlier but below management's internal expectations.
- Net income attributable to Karat fell to $4.4 million, or $0.22 per diluted share, down from $7.3 million, or $0.36 per share, in the prior-year quarter as margins compressed.
- Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) declined to $8.9 million from $13.1 million, with adjusted EBITDA margin narrowing to 6.6% from 10.5%.
- Management said the quarter was pressured by higher resin, oil, and ocean freight costs, while delayed orders from certain chain accounts pushed revenue into the fourth quarter.
- The company guided fourth-quarter net sales growth of 9% to 11% and reiterated a regular quarterly dividend of $0.47 per share.
Putting the Quarter in Context
Karat Packaging is a specialty distributor and manufacturer of disposable foodservice products serving national and regional restaurants across the United States. Its results offer a window into foodservice demand, freight markets, and resin costs. The third quarter of 2026 arrived with elevated oil and ocean freight prices tied to Middle East tensions, pressuring input costs across the packaging industry. Notably, this quarter lacked the large one-time benefit from IEEPA tariff refunds that boosted first-half profitability, making the quarter a cleaner test of the company's underlying operating performance and cost discipline. I also checked this using Tickeron’s AI Screener to see how the stock compares to others in the industry.
The Numbers Behind the Report
For the third quarter ended September 30, 2026, KRT posted net sales of $134.7 million, an 8.2% increase from $124.5 million in the prior-year period. Management acknowledged revenue came in roughly $2.5 million below its own expectations, citing chain accounts that delayed order pull-through for testing purposes and shifted volumes into the fourth quarter.
Net income attributable to Karat Packaging was $4.4 million, or $0.22 per diluted share, compared with $7.3 million, or $0.36 per share, a year earlier. Net income margin narrowed to 3.5% from 6.1%. Adjusted diluted earnings per share were $0.24, versus $0.37 in the prior-year quarter. Adjusted EBITDA was $8.9 million, down from $13.1 million, with adjusted EBITDA margin contracting to 6.6% of net sales from 10.5%.
The profit decline reflected higher product and import costs, including elevated average container rates and fuel surcharges. Unlike the first half of the year, the quarter included no significant IEEPA tariff refund contribution.
How the Market Responded
Karat Packaging entered the report with consensus expectations for a stronger quarter, with analyst estimates pointing toward earnings around $0.44 per share on revenue near $139.8 million. The reported $0.22 in diluted EPS and $134.7 million in revenue landed below those benchmarks, driven by margin compression and the timing shift in chain-account orders. The company's guidance for 9% to 11% fourth-quarter sales growth signaled confidence that delayed volumes would recover. Investors are likely weighing near-term cost pressure from resin and freight against the company's sourcing diversification and a resumption of demand from newly added chain accounts.
Looking Ahead: What to Watch
Management guided to fourth-quarter 2026 net sales growth of 9% to 11% year over year, gross margin of 33% to 35%, and adjusted EBITDA margin in the high single digits. For full-year 2026, the company expects net sales growth of 9% to 11%, gross margin of 39% to 41%, and adjusted EBITDA margin in the mid-teens, with both margin figures incorporating first-half IEEPA tariff refunds.
Several factors will shape the quarters ahead. First, ocean freight costs remain a key swing factor; management noted contract rates around $2,500 per container but said actual costs averaged $4,500 to $6,000 during the quarter due to surcharges and limited container availability. If carriers unwind peak-season fees and bunker surcharges, freight expenses could ease into early 2027.
Second, resin and oil prices directly influence product costs, and management has so far avoided aggressive price increases to customers while awaiting more clarity on the geopolitical environment. Any sustained rise in input costs could test that approach. Third, the company is building inventory to support new chain accounts expected to begin ordering in the first quarter of 2027, which may temporarily affect working capital.
Finally, watch the online channel, a strategic growth driver that has been expanding at a double-digit pace, alongside the new Orlando distribution center intended to improve Southeast fulfillment and e-commerce delivery times. These initiatives could support top-line momentum, though margin recovery will likely depend on moderating freight and resin costs. From what I see, this is important because cost trends here often signal broader pressures in the sector.
Enhancing Research with Tickeron Tools
In my view, Tickeron’s AI Screener has become a regular part of how I compare names like this one against peers on fundamentals, patterns, and signals. It helps surface relevant ideas quickly when I’m reviewing quarterly results across the packaging space, keeping the process efficient without replacing my own analysis.
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Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
Momentum Indicator for KRT turns negative, indicating new downward trend
KRT saw its Momentum Indicator move below the 0 level on November 02, 2026. This is an indication that the stock could be shifting in to a new downward move. Traders may want to consider selling the stock or exploring put options. Tickeron's A.I.dvisor looked at 93 similar instances where the indicator turned negative. In 65 of the 93 cases, the stock moved further down in the following days. The odds of a decline are at 70%.
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for KRT moved out of overbought territory on October 06, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 39 similar instances where the indicator moved out of overbought territory. In 27 of the 39 cases, the stock moved lower in the following days. This puts the odds of a move lower at 69%.
The Moving Average Convergence Divergence Histogram (MACD) for KRT turned negative on October 07, 2026. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 53 similar instances when the indicator turned negative. In 36 of the 53 cases the stock turned lower in the days that followed. This puts the odds of success at 68%.
KRT moved below its 50-day moving average on November 05, 2026 date and that indicates a change from an upward trend to a downward trend.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where KRT declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 63%.
Bullish Trend Analysis
The Stochastic Oscillator demonstrated that the ticker has stayed in the oversold zone for 2 days, which means it's wise to expect a price bounce in the near future.
Following a +2.77% 3-day Advance, the price is estimated to grow further. Considering data from situations where KRT advanced for three days, in 261 of 341 cases, the price rose further within the following month. The odds of a continued upward trend are 77%.
KRT may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In 225 of 273 cases where KRT Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are 82%.
Fundamental Analysis (Ratings)
The Tickeron Profit vs. Risk Rating rating for this company is 4 (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 84, placing this stock better than average.
The Tickeron PE Growth Rating for this company is 17 (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron SMR rating for this company is 33 (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Price Growth Rating for this company is 35 (best 1 - 100 worst), indicating steady price growth. KRT’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of 73 (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: KRT's P/B Ratio (5.971) is slightly higher than the industry average of (1.404). P/E Ratio (20.494) is within average values for comparable stocks, (16.764). Projected Growth (PEG Ratio) (0.020) is also within normal values, averaging (1.023). Dividend Yield (0.037) settles around the average of (0.032) among similar stocks. P/S Ratio (2.026) is also within normal values, averaging (1.259).
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Industry ContainersPackaging
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