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WestRock (WRK) Q4 Earnings & Revenues Top Estimates, Up Y/Y

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WestRock (WRK) Q4 Earnings & Revenues Top Estimates, Up Y/Y

WestRock (WRK) has expanded its portfolio of paper and packaging solutions for customers by completing the KapStone acquisition.

WestRock Company WRK delivered fourth-quarter fiscal 2018 (ended Sep 30, 2018) adjusted earnings of $1.29 per share, surpassing the Zacks Consensus Estimate of $1.24. The reported figure also logged a year-over-year improvement of 48%.

 

Including one-time items, the company reported earnings of $1.08 per share in the fourth quarter compared with 76 cents per share recorded in the prior-year quarter.

 

WestRock Company Price, Consensus and EPS Surprise

 

 

WestRock Company Price, Consensus and EPS Surprise

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

Operational Update

WestRock’s total revenues rose 4% year over year to $4,237 million, outpacing the Zacks Consensus Estimate of $4,260 million. The increased sales in the Corrugated Packaging on the back of higher selling price drove year-over-year improvement in sales.

 

Cost of sales inched up 0.4% year over year to $3,295 million in the fourth quarter. Gross profit advanced 21% to $942 million. Gross margin expanded 300 basis points to 22.2% in the quarter. Adjusted segment EBITDA was $807 million compared with $654 million reported in the prior-year quarter. Adjusted operating income was $564 million, up 37% from $412 million in the prior-year quarter.

 

Segment Performance

 

Corrugated Packaging: Sales at the segment improved 7% year over year to $2,390 million in the reported quarter. Adjusted segment EBITDA increased 42% year over year to $548 million.

 

Consumer Packaging: Sales at the segment inched up 1% to $1,879 million from the year-ago quarter. Adjusted segment EBITDA dipped 2% year over year to $275 million.

 

Land and Development: The segment’s sales came in at $39.5 million compared with $18.7 million in the prior-year quarter. Adjusted segment EBITDA for the segment was a loss of $2.7 million, an improvement from the loss of $5.5 million recorded in the prior-year quarter.

 

Fiscal 2018 Performance

 

WestRock reported fiscal 2018 adjusted earnings of $4.09 per share, which outpaced the Zacks Consensus Estimate of $4.04 and also improved 56% year over year. Including one-time items, the company reported earnings of $7.34 per share in the fiscal compared with $2.77 per share recorded in the prior year.

 

WestRock’s total revenues rose 10% year over year to $16.3 billion, in-line with the Zacks Consensus Estimate.

 

Financial Position

 

As of fiscal 2018-end, cash and cash equivalents were $637 million, up from $298 million as of fiscal 2017-end. As of Sep 30, 2018, total debt was $6.4 billion, up from $6.6 billion as of Sep 30, 2017. Cash flow from operations came in at $2.4 billion in fiscal 2018 compared with $1.9 billion recorded in the prior year.

 

During fiscal 2018, WestRock invested $1 billion in capital expenditures, paid $441 million in dividends and repurchased shares worth $195 million. The company also spent $348 million in strategic acquisitions and investments. The company also hiked annual dividend by 5.8% to an annualized rate of $1.82 per share.  WestRock stated that the company has achieved its aforementioned target of $1 billion of synergy and performance improvements since its inception in 2015. It has also attained $246 million of productivity improvement year over year.

 

On Nov 2, WestRock completed the acquisition of rival KapStone Paper and Packaging Corp. KS. The company expects to achieve approximately $200 million in synergies and performance improvements by the end of fiscal 2021 through the integration of the former KapStone operations into WestRock’s corrugated business. The buyout will help WestRock expand presence in the western United States. It will also broaden the company’s differentiated paper and packaging solutions portfolio with the addition of attractive paper grades and distribution capabilities.

 

 

Shares of WestRock have dipped 24.7% over the past year, compared with the industry’s decline of 6.5%.

 

Zacks Rank & Stocks to Consider

 

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

 

A few better-ranked stocks in the basic materials space are CF Industries Holdings, Inc. CF and KMG Chemicals, Inc. KMG. 

 

CF Industries has an expected long-term earnings growth rate of 6% and a Zacks Rank #1 (Strong Buy). The company’s shares have gained 27% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

KMG Chemicals has an expected long-term earnings growth rate of 28.5% and a Zacks Rank #2 (Buy). Its shares have risen 43% in a year’s time.

 

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