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WestRock (WRK) Q2 Earnings & Sales Miss Estimates, Down Y/Y

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WestRock Company WRK reported second-quarter fiscal 2021 (ended Mar 31, 2021) adjusted earnings of 54 cents per share, down from the 67 cents recorded in the year-ago period. Also, the fiscal second-quarter earnings missed the Zacks Consensus Estimate of 62 cents.

Including one-time items, earnings came in at 42 cents per share compared with the 57 cents reported in the prior-year quarter.

Operational Update

WestRock’s total revenues edged down 0.2% year over year to $4,438 million. The revenue figure also missed the consensus mark of $4,498 million. This decline was mainly due to the impact of ransomware incident and winter weather.

Cost of sales was up 1.2% year on year to $3,688 million during the fiscal second quarter. Gross profit slid 6.8% year over year to $749.6 million. Adjusted segment EBITDA was $641 million compared with the $708 million witnessed in the year-earlier quarter. Total segment income came in at $286.5 million, down from the year-ago quarter’s $335.3 million.

WestRock Company Price, Consensus and EPS Surprise

WestRock Company Price, Consensus and EPS Surprise
WestRock Company Price, Consensus and EPS Surprise

WestRock Company price-consensus-eps-surprise-chart | WestRock Company Quote

Segmental Performance

Corrugated Packaging: Sales in the segment were up 1% year over year to $2,913 million during the March-end quarter primarily on higher selling price/mix, partly offset by unfavorable impacts of foreign-currency translation and lower volumes. Adjusted segment EBITDA decreased 12.7% year over year to $438 million.

Consumer Packaging: Sales in the segment went down 1.6% year on year to $1,589.9 million. This downside resulted from lower volumes that were partly offset by favorable foreign-currency impacts and higher selling price/mix. Adjusted segment EBITDA fell 4.5% year over year to $212 million.

Financial Position

WestRock had cash and cash equivalents of $334 million as of Mar 31, 2021, up from $251 million reported as of Sep 30, 2020. The company reported total debt of $8.94 billion as of Mar 31, 2021, down from $9.43 billion as of Sep 30, 2020.

Net cash provided by operating activities for second-quarter fiscal 2021 was $132 million as compared with the $168 million recorded in the prior-year quarter. During the fiscal second quarter, WestRock invested $132 million in capital expenditures, paid out $53 million in dividends to stockholders and received proceeds of $59 million from the sale of the Summerville, SC sawmill.

On Jan 25, the company reported a ransomware incident affecting certain of its operational and information technology systems. During the fiscal second quarter, the company lost approximately 167,000 tons of containerboard and paperboard production due to the event.

The company also incurred around $20 million of ransomware recovery costs. It expects to recover the ransomware losses from cyber and business interruption insurance in the future.

Price Performance

Shares of WestRock have appreciated 139.8% over the past year, compared with the industry’s growth of 102.5%.


Zacks Rank & Stocks to Consider

WestRock currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the basic materials space include ArcelorMittal MT, Celanese Corp. CE and Dow Inc. DOW. All of these stocks flaunt a Zacks Rank #1 (Strong Buy) currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

ArcelorMittal has a projected earnings growth rate of 984.7% for the current fiscal year. The company’s shares have soared nearly 179% in the past year.

Celanese has an expected earnings growth rate of 68.3% for the current fiscal year. The company’s shares have rallied around 90% over the past year.

Dow has a projected earnings growth rate of 261.6% for the current fiscal year. The company’s shares have gained roughly 75% in a year’s time.

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