Can WestRock (WRK) Maintain Earnings Streak In Q3?

WestRock Company (NYSE:WRK) is scheduled to report third-quarter fiscal 2016 results on Aug 4, before the market opens.

In the last quarter, the company had delivered a positive earnings surprise of 15.09%. However, unfavorable currency translations as well as lower sales in both the Consumer Packaging and Specialty Chemicals segments weighed on its revenues in the quarter.

Let’s see how things are shaping up for this quarter.

Factors to Consider

Formed by the merger of MeadWestvaco and Rock-Tenn, WestRock is realizing the strategic benefits of the merger. The company is poised to benefit from its productivity programs and ongoing capital investment to upgrade its capabilities.

WestRock's acquisition of SP Fiber Holdings, Inc. and its 48% interest in Green Power Solutions is expected to generate significant synergies and be accretive to earnings. The company has also completed the spin-off of its specialty chemicals business, Ingevity, since it is not in line with the company’s core business. The spinoff will better position both businesses to pursue their respective operating priorities and strategies.

Moreover, WestRock will benefit from acquisitions and further share repurchases. However, merger-related expenses, soft industry demand for promotional display and a weak euro and real may hamper its results.

Why a Likely Positive Surprise?

Our proven model shows that WestRock is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP for the company stands at +6.06% as the Most Accurate estimate is pegged at 70 cents while the Zacks Consensus Estimate is lower at 66 cents. Positive ESP is a meaningful and leading indicator of a likely earnings surprise.

Zacks Rank: WestRock carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should not be considered going into an earnings announcement.

The combination of WestRock’s Zacks Rank #3 and a positive ESP makes us confident of an earnings beat in the upcoming report.

Surprise History

WestRock outpaced the Zacks Consensus Estimate in each of the trailing four quarters. The average positive surprise was 7.12%.

Stocks to Consider

Here are some stocks worth considering, as according to our model they have the right combination of elements to post an earnings beat this quarter.

International Flavors & Fragrances Inc. (NYSE:IFF) has an Earnings ESP of +0.71% and a Zacks Rank #2.

Hi-Crush Partners LP (NYSE:HCLP) has an Earnings ESP of +4.55% and a Zacks Rank #3.

Minerals Technologies Inc. (NYSE:MTX) has an Earnings ESP of +0.87% and a Zacks Rank #3.