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Wells Fargo Downgrades WestRock to “Market Perform”

Friday’s Consumer Pops and Drops: GIII, RL, PII, and WRK

(Continued from Prior Part)

WestRock’s price movement

WestRock (WRK) has a market cap of $8.0 billion. WRK rose by 0.51% to close at $37.19 per share on April 8, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -5.1%, 4.5%, and -17.5%, respectively, as of the same day. This means that WRK is trading 2.7% below its 20-day moving average, 5.3% above its 50-day moving average, and 22.9% below its 200-day moving average.

A related ETF and peers

The iShares Global Timber & Forestry ETF (WOOD) invests 3.1% of its holdings in WestRock. The ETF tracks the 25 largest publicly listed companies that own or manage forests and timberlands. The YTD price movement of WOOD was -6.5% as of April 7, 2016.

The market caps of WestRock’s competitors are as follows:

  • International Paper (IP) – $16.6 billion

  • Packaging Corporation of America (PKG) – $5.6 billion

  • Graphic Packaging Holding Company (GPK) – $4.1 billion

Wells Fargo downgraded WestRock to “market perform” from “outperform.”

Performance of WestRock in fiscal 1Q16

WestRock (WRK) reported fiscal 1Q16 net sales of $3.7 billion, a rise of 46.4% over the net sales of $2.5 billion in fiscal 1Q15. It reported consumer packaging, specialty chemical, and land and development segment sales of $1.5 billion, $209.8 million, and $15.4 million, respectively, in fiscal 1Q16. Sales from the corrugated packaging segment rose by 6.6% between fiscals 1Q15 and 1Q16.

The company’s net income and EPS (earnings per share) fell to -$453.5 million and -$1.76, respectively, in fiscal 1Q16, compared with $125.1 million and $0.88, respectively, in fiscal 1Q15.

In fiscal 1Q16, WestRock’s cash and cash equivalents and inventories rose by 3.8% and 3.3%, respectively, on a quarterly basis. Its current ratio fell to 1.8x and its debt-to-equity ratio rose to 1.2x, compared with current and debt-to-equity ratios of 1.9x and 1.15x, respectively, in fiscal 4Q15.

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