Amid escalating Canada-U.S. trade tensions, it’s easy to assume that every Canadian stock exposed to the American market is heading for trouble. However, companies like Cascades (TSX: CAS) give me a reason to look beyond that assumption. This packaging firm isn’t immune to the risks of higher U.S. tariffs, but it enters the trade war with several advantages that could soften the blow.
Interestingly, Cascades has spent recent quarters improving profitability, reducing debt, streamlining its portfolio, and pushing through higher selling prices. Those changes give it more flexibility to deal with an external shock without destroying its long-term fundamentals and growth outlook.
Let’s find out why Cascades’ stronger operating position and tariff-mitigation efforts could help this TSX-listed packaging stock outlast the trade war.
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Why Cascades deserves a closer look
Simply put, this Kingsey Falls-headquartered firm provides packaging, tissue, hygiene, and recovery solutions across North America. Its packaging products serve several markets, including food, retail, protection, and e-commerce.
Cascades stock currently trades at $17.09 per share with a market cap of roughly $1.7 billion. It also offers an annualized dividend yield of 2.8%, paid quarterly. Over the last year, Cascades has impressed investors by delivering a solid 73% return. That rally has been fueled by its improving operating results and a stronger financial position.
Profitability is moving in the right direction
In the second quarter, Cascades generated $1.2 billion in sales, up about 3% year-over-year (YoY). Higher average selling prices added $13 million to its sales, while a favourable sales mix contributed another $21 million.
More importantly, the packaging company’s operating income jumped about 61% YoY to $58 million. As a result, its adjusted earnings for the quarter climbed about 26% to $0.24 per share. Higher volumes, stronger prices, and cost-reduction efforts also supported Cascades’ adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) growth. However, higher raw material and transportation costs stole some of those gains.
Meanwhile, its packaging products business remained the biggest contributor as the segment’s sales rose about 1% YoY to $772 million.
Why the tariff hit may be manageable
Interestingly, recent improvements across Cascades’ operations could leave the company better positioned to weather the trade war. Although some of its tissue and packaging products exported to the U.S. could face the announced 50% tariffs, the company believes the potential impact is manageable as it pursues tactical initiatives that could materially reduce the financial impact over the coming months.
At the same time, the Canadian firm is implementing previously announced selling price increases across packaging and tissue businesses. In packaging, a $50-per-ton price increase announced in June is expected to strengthen its earnings momentum in the coming quarters.
Another key factor that makes Cascades stock look even more appealing is its improving balance sheet. Last quarter, the company’s net debt fell nearly 11% YoY to $1.9 billion, while its net debt-to-adjusted EBITDA ratio improved to 3.3 times from 3.8 times a year ago.
Excluding the potential impact of the announced tariffs, Cascades expects its annual run-rate adjusted EBITDA to exceed $600 million during the second half of 2026. With price increases underway, operating efficiency improving, and debt moving lower, Cascades seems well prepared to handle trade turbulence even as the trade war noise hurts investor sentiment.
For investors comfortable with some market volatility due to near-term trade uncertainty, Cascades’ improving resilience and profitability make this TSX packaging stock attractive to consider right now.
