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What's in the Offing for WestRock's (WRK) Q1 Earnings?

Zacks Equity Research

WestRock Company WRK is set to report first-quarter fiscal 2020 results on Jan 30, before the opening bell.  WestRock has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 10.5%.

Which Way are Estimates Treading?

The Zacks Consensus Estimate for WestRock’s fiscal first-quarter revenues is pegged at $4.3 billion, suggesting 0.02% growth from the year-ago quarter. The same for earnings per share is pinned at 57 cents, indicating a year-over-year decline of 31.3%.

The company has been witnessing downward revisions, of late. The Zacks Consensus Estimate for the company’s fiscal first-quarter earnings moved 3.3% south to 57 cents over the past 30 days.

WestRock’s shares have lost 0.6% over the past year compared with the industry’s decline of 16.7%.


 

Will the upcoming earnings release provide a boost to WestRock’s stock? Let’s take a look.

Factors to Influence Q1 Results

WestRock acquired KapStone Paper and Packaging Corp last year 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 improve its North American corrugated packaging business margins. These moves are likely to have contributed to the fiscal first-quarter results. Also, WestRock is likely to have benefited from continued investment in growth projects during the fiscal first quarter. Further, productivity, performance-improvement programs across its manufacturing footprint and cost savings are anticipated to have aided the company’s performance during this period.

 WestRock’s fiscal first-quarter performance will likely reflect the unusual impact of higher maintenance downtime. This includes 65,000 tons of downtime for outage underway at the Florence mill, as the company replaced its three older paper machines with a new paper machine. The Zacks Consensus Estimate for the Consumer Packaging segment’s revenues is pegged at $1,651 million for the quarter, indicating a rise of 2% from the year-ago quarter. The Consumer Packaging segment’s adjusted EBITDA is anticipated to decline 1.4% year over year to $213 million.

For the Corrugated Packaging segment revenues, the Zacks Consensus Estimate is pegged at $2,650 million, indicating a 3% fall, year on year. The segment’s adjusted EBITDA is likely to be down 9.2% to $484 million.
 
For the quarter under review, the company expects adjusted segment EBITDA between $670 million and $690 million compared with the $733 million reported in first-quarter fiscal 2019. Benefits from higher volumes might have been offset by lower containerboard prices and mix impact. Also, lower pulp prices are likely to have affected the company’s quarterly performance.

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 -0.88%.

Zacks Rank: WestRock currently carries a Zacks Rank of 4 (Sell).

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:

Bunge Limited BG has an Earnings ESP of +18.18% and sports a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cleveland-Cliffs Inc. CLF has an Earnings ESP of +6.25% and currently carries a Zacks Rank #2.

LyondellBasell Industries N.V. LYB has an Earnings ESP of +2.83% and carries a Zacks Rank #3, currently.

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