Karat Packaging (KRT) Earnings Date & Reports

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.
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Earnings Context and Why It Matters

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 (International Emergency Economic Powers Act) tariff refunds that boosted first-half profitability, making the quarter a cleaner test of the company's underlying operating performance and cost discipline.

Reported Results

For the third quarter ended September 30, 2026, Karat Packaging 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.

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Market Reaction and Investor Sentiment

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.

Forward Outlook and Key Factors to Monitor

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.

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