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Here's Why You Should Hold On to WestRock (WRK) Stock for Now

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·4 min read
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WestRock Company WRK is poised to gain the e-commerce boom and acquisitions. Its consumer packaging segment’s top-line performance will be supported by the pandemic led surge in demand for food, beverage and other products amid the pandemic. Growing preference for sustainable paper and packaging options will also continue to drive the segment. Its corrugated packaging business will benefit from higher demand from distribution, industrial and agricultural customers.

WestRock currently has a Zacks Rank #3 (Hold) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, offer the best investment opportunities for investors.

Factors Favoring WestRock

Positive Earnings Surprise History: WestRock has a trailing four-quarter earnings surprise of 20%, on average.

Price Performance: Shares of WestRock have soared 96.2% over the past year, outperforming the industry’s rally of 80.5%.

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Estimates Northbound: Over the past two months, the Zacks Consensus Estimate for fiscal 2021 earnings has increased 1%. Meanwhile, the same for fiscal 2022 has also been revised 11% upward in the same time frame.

Healthy Growth Projections: The Zacks Consensus Estimate for WestRock’s earnings for fiscal 2021 is currently pegged at $3.45, suggesting year-over-year growth of 25%. Fiscal 2022 earnings per share is expected to register an improvement of 41.7% to $4.89.

The company has a long-term estimated earnings growth of 17.8%.

Growth Drivers in Place

E-commerce demand remains strong across all channels and momentum will continue, particularly on account of the coronavirus pandemic. Its corrugated packaging business is poised to gain from improved box shipment, and increased demand from distribution, industrial and agricultural customers as the economy gradually recovers. Consumer packaging business is gaining from sustainable paper and packaging options, and significant demand in food, food service, and beverage packaging categories owing to the pandemic.

WestRock continues to invest in business, which includes strategic capital projects that have attractive returns, and targeted mergers and acquisitions. During fiscal 2018 and 2019, the company completed acquisitions of Schlüter, Plymouth Packaging and rival KapStone Paper and Packaging Corp that expanded its product offerings and geographic presence. The integration of KapStone Paper, the most notable acquisition among these, is on track.

The company’s Specialty kraft paper business is gaining from customers’ growing reference for natural fiber-based packaging over plastic bags. In Brazil, it has been witnessing strong demand for containerboard and corrugated packaging. The company is well-poised to capitalize on this growth in the region, with the ramp-up of Porto Feliz box plant and the completion of the Tres Barras mill upgrade project. The company will also reap the benefits of strategic capital projects in its mill and converting systems.

WestRock also successfully started the new state-of-the-art 710,000 ton paper machine paper machine at Florence, SC, which replaces three old and obsolete machines. It is also reconfiguring its North Charleston, SC, paper mill to improve the long-term competitiveness of the mill. These strategic investments and KapStone synergy realization are expected to contribute approximately $125 million of EBITDA in fiscal year 2021 and a similar amount in fiscal year 2022.

Stocks to Consider

Some better-ranked stocks worth considering in the basic materials space include Univar Solutions Inc. UNVR, Nucor Corporation NUE and Cabot Corporation CBT. While Univar Solutions and Nucor sport a Zacks Rank #1, Cabot currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar has a projected earnings growth rate of roughly 35.2% for the current year. The company’s shares have rallied around 53% in a year.

Nucor has a projected earnings growth rate of 259.9% for the current year. The company’s shares have soared around 130% in a year.

Cabot has an expected earnings growth rate of around 126% for the current fiscal. The company’s shares have surged 60% in the past year.

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WestRock Company (WRK) : Free Stock Analysis Report

Nucor Corporation (NUE) : Free Stock Analysis Report

Cabot Corporation (CBT) : Free Stock Analysis Report

Univar Solutions Inc. (UNVR) : Free Stock Analysis Report

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