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Factors Setting the Tone for WestRock's (WRK) Q4 Earnings

Zacks Equity Research

WestRock Company WRK is set to report fourth-quarter fiscal 2019 results on Nov 7, before the opening bell.  WestRock has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 19.9%.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for WestRock’s fiscal fourth-quarter revenues is pegged at $5 billion, suggesting growth of 18.1% from the year-ago quarter. The same for earnings per share stands at $1.21, indicating a decline of 6.2% from the prior-year reported figure.

The company has been witnessing downward revisions, of late. The Zacks Consensus Estimate for the company’s fiscal fourth-quarter earnings moved 1.6% south to $1.21 over the past 30 days.

WestRock’s shares have lost 6% over the past year compared with the industry’s decline of 46.7%.

Will the upcoming earnings release provide a boost to WestRock’s stock? Let’s take a look.

Factors to Influence Q4 Results

WestRock is likely to have benefited from the KapStone acquisition and continued investment in growth projects during the fiscal fourth quarter. Further, productivity and performance-improvement programs across its manufacturing footprint will likely have aided the company’s performance during this period.

WestRock acquired KapStone Paper and Packaging Corp last year and the integration is on track. The acquisition has helped the company strengthen its presence in the Western United States. Further, WestRock continues to improve its North American corrugated packaging business’ margins. Also, the company is on track to achieve synergy target of $200 million.  These factors are likely to have contributed to the fiscal fourth-quarter results.
WestRock’s performance in the fiscal fourth quarter will likely reflect the impact of higher maintenance downtime. The Zacks Consensus Estimate for the Consumer Packaging segment’s revenues is pegged at $1,813 million for the quarter, indicating a decline of 3.5% from the year-ago quarter. The Consumer Packaging segment’s adjusted EBITDA is anticipated to improve 1% year over year to $278 million. The segment is expected to have been impacted by maintenance downtime of 5,000 tons in the fiscal fourth quarter.

For the Corrugated Packaging segment revenues, the Zacks Consensus Estimate is pegged at $3,046 million, indicating an improvement of 27.4% from the year-ago reported quarter. The segment’s adjusted EBITDA is likely to jump 17.3% to $643 million. Also, the segment is anticipated to reflect impact of maintenance downtime of 35,000 tons.

The Land & Development segment is projected to report revenues of $10.3 million in the quarter under review, down from the prior-year quarter’s $39.5 million.

Nevertheless, benefits from higher sequential seasonal volumes across the Corrugated and Consumer Packaging segments might have been offset by lower containerboard prices in the quarter. Further, lower recycled fiber, virgin fiber, energy and freight costs, and productivity improvement are expected to have bolstered the company’s EBITDA in the to-be-reported quarter.

WestRock Company Price and EPS Surprise

WestRock Company Price and EPS Surprise
WestRock Company Price and EPS Surprise

WestRock Company price-eps-surprise | WestRock Company Quote

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for WestRock this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for WestRock is +0.06%.

Zacks Rank: WestRock currently carries a Zacks Rank of 4.

Stocks Worth a Look

Here are few Basic Materials stocks which you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Franco-Nevada Corporation FNV has an Earnings ESP of +0.34% and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross Gold Corporation KGC has an Earnings ESP of +2.50% and carries a Zacks Rank of 1, at present.

LyondellBasell Industries N.V. LYB has an Earnings ESP of +1.32% and carries a Zacks Rank #3, currently.

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