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WestRock (WRK) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

WestRock Company WRK is set to report third-quarter fiscal 2020 results (ended as of Jun 30, 2020) on Aug 4, before the opening bell.

The company has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in all of the trailing four quarters, the average beat being 6.18%.

Which Way are Estimates Treading?

The Zacks Consensus Estimate for WestRock’s fiscal third-quarter revenues is pegged at $4,354 million, suggesting a decline of 7.2% from the year-ago quarter. The same for earnings per share is pinned at 43 cents, indicating a year-over-year slump of 61.3%.

The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings moved south over the past 60 days.

Let’s see how things have shaped up for this announcement.

Key Factors

Packaging products are essential for the distribution of food, beverage and pharmaceutical products. Further, the coronavirus pandemic has fueled e-commerce growth as consumers’ demand for online grocery, beverage and pharmaceuticals delivery services has skyrocketed following the travel restrictions worldwide. Consequently, the company’s Consumer Packaging segment is expected to have benefited in the fiscal third quarter from the elevated demand for the packaging of food, beverages, household cleaning and liquid packaging.

WestRock acquired KapStone Paper and Packaging Corp in 2019 and the integration is on track. The acquisition has helped the company cement its presence in the Western United States. Further, the company continues to boost its North American corrugated packaging business margins. These moves are likely to have contributed to the fiscal third-quarter performance. In addition, productivity, performance-improvement programs across its manufacturing footprint and cost savings from capital investments are anticipated to have aided the company’s performance during the quarter under review.

However, waning demand across some of WestRock’s businesses owing to the impact of the pandemic might have dented its fiscal third-quarter performance. The company’s margin in the to-be-reported quarter will likely reflect the unfavorable impact of higher recycled fiber costs. Also, reduction in published linerboard prices might have offset volume growth across its segments.

The Zacks Consensus Estimate for the Consumer Packaging segment’s quarterly revenues is pegged at $1,609 million, calling for a decline of 2.5%, year on year. The Consumer Packaging segment’s adjusted EBITDA is estimated to be down 12.8% year over year to $203 million.

For the Corrugated Packaging segment revenues, the Zacks Consensus Estimate is pegged at $2,788 million, calling for a 9.3% fall, year on year. The segment’s adjusted EBITDA is likely to dip 34% year over year to $425 million.

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 -7.69%.

Zacks Rank: WestRock currently carries a Zacks Rank of 3.

Share Price Performance

WestRock’s shares have lost 20.7% over the past year compared with the industry’s decline of 17.2%.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post earnings beat this quarter:

Kinross Gold Corporation KGC currently carries a Zacks Rank #2 and an Earnings ESP of +3.70%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Eastman Chemical Company EMN has an Earnings ESP of +4.74% and holds a Zacks Rank of 3 currently.

Fortuna Silver Mines Inc. FSM has an Earnings ESP of +50.00% and carries a Zacks Rank #3, at present.

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