WestRock (WRK) Earnings And Revenues Surpass Estimates In Q1

WestRock Company (NYSE:WRK) has delivered first-quarter fiscal 2020 (ended Dec 31, 2019) adjusted earnings of 58 cents per share, surpassing the Zacks Consensus Estimate of 57 cents. However, earnings declined 30% from the prior-year quarter figure of 83 cents per share.

Including one-time items, the company reported earnings per share of 53 cents in the reported quarter, down 1.9% from the prior-year quarter’s 54 cents.

Operational Update

WestRock’s total revenues jumped 2.2% year over year to $4,423.7 million. Moreover, the metric surpassed the Zacks Consensus Estimate of $4,328.5 million.

The year-over-year improvement in total sales can primarily be attributed to an additional month of KapStone ownership in fiscal 2020, partially offset by lower corrugated and pulp prices, and lower consumer paperboard volumes.

Cost of sales improved 1.9% year over year to $3,614.7 million in the first quarter of fiscal 2020. Gross profit advanced 1.5% year over year to $1,081 million. Gross margin came in at 24.4% compared with 24.6% reported in the prior-year period. Adjusted segment EBITDA was $675.3 million compared with the $733.2 million reported in the prior-year quarter.

Total segment income was $331 million, up from $324 million witnessed in the year-ago quarter.

WestRock Company Price, Consensus and EPS Surprise

Segmental Performance

Corrugated Packaging: Sales in the segment improved 6.4% year over year to $2,909.5 million in the reported quarter, backed by the KapStone acquisition, partly offset by lower volumes and prices. Adjusted segment EBITDA declined 4.8% year over year to $507.6 million.

Consumer Packaging: Sales in the segment declined 5.1% year over year to $1,536.9 million. The downside resulted from lower volumes and selling prices, and unfavorable foreign currency impact. Adjusted segment EBITDA was down 14.7% year over year to $184.3 million.

Land and Development: The segment’s sales were $18.9 million compared with the year-earlier quarter’s figure of $13.9 million.

Financial Position

As of Dec 31, 2019, cash and cash equivalents were $156.4 million, significantly down from $260.7 million as of Dec 31, 2018. As of Dec 31, 2019, total debt was $10.2 billion, up from $10.1 billion as of Sep 30, 2019. Cash flow from operations was $431 million in the reported quarter compared with $303 million reported in the prior-year quarter.

WestRock invested $375 million in capital expenditure and paid out $120 million in dividends in the reported quarter.

Acquisition$31 million

WestRock has so far achieved more than $110 million of its $200-million targeted synergies from the acquisition of KapStone. WestRock remains focused on organic growth, productivity improvement, cash-flow generations and debt reduction.

Share Price Performance

Shares of WestRock have lost 2% over the past year compared with the industry’s decline of 20.5%.

Zacks Rank & Stocks to Consider

WestRock currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp. (NYSE:DQ) , Royal Gold, Inc. (NASDAQ:RGLD) and Commercial Metals Company (NYSE:CMC) .

Daqo New Energy has a projected earnings growth rate of 326.3% for 2020. The company’s shares have rallied 44.3% in a year. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Gold has an estimated earnings growth rate of 83.5% for fiscal 2020. It currently flaunts a Zacks Rank #1. Its shares have rallied 32.5% in a year.

Commercial Metals has a Zacks Rank #2 (Buy) and a projected earnings growth rate of 20.2% for 2020. The company’s shares have rallied 20.8% in a year.

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