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WestRock (WRK) Q2 Earnings Surpass Estimates, Sales Lag
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WestRock Company (WRK) reported adjusted earnings of 77 cents per share in second-quarter fiscal 2023 (ended Mar 31, 2023), surpassing the Zacks Consensus Estimate of earnings of 51 cents per share. The bottom line however declined 34% year over year due to cost inflation, lower volumes, economic downtime and the Mahrt mill work stoppage.
Including one-time items, WRK reported a loss of $7.85 per share, compared with earnings of 15 cents per share reported in the prior-year quarter. The loss was primarily due to the $1.9 billion pre-tax, non-cash goodwill impairment and higher restructuring and other costs.
Lower volumes (excluding the Grupo Gondi acquisition,) cost inflation, economic downtime, higher non-cash pension costs, costs associated with the Mahrt mill work stoppage and business systems transformation costs also impacted results. These expenses were partially offset by higher selling price/mix, cost savings and contribution from the Grupo Gondi acquisition.
WestRock’s total revenues declined 1.9% year over year to $5.28 billion. The top line lagged the Zacks Consensus Estimate of $5.29 billion. The weaker-than-expected top-line results were mainly due to lower global paper segment sales. Net sales in the current year quarter included $328 million related to the consolidation of Gondi, S.A. de C.V.
WestRock Company Price, Consensus and EPS Surprise
The cost of sales was down 0.5% year over year to $4,357 million in the fiscal second quarter. Gross profit declined 8% year over year to $920 million.
Adjusted segment EBITDA was $823 million, compared with $871 million in the year-earlier quarter.
Improved EBITDA performance in the Corrugated Packaging, Consumer Packaging and Distribution segments was offset by lower EBITDA in the Global Paper segment.
Segment Performances
Sales in the Corrugated Packaging segment were up 13% year over year to $2,627 million during the quarter under review. Adjusted segment EBITDA increased 24% year over year to $408 million.
The Consumer Packaging segment reported sales of $1,265 million, up 1% year over year. Adjusted segment EBITDA rose 6% year over year to $219 million.
Sales in the Global Paper segment moved down 24% year over year to $1,168 million. Adjusted segment EBITDA plunged 39% year over year to $187 million. The Distribution segment’s sales declined 15% year over year to $307 million. Adjusted segment EBITDA surged 67% year over year to $9.3 million.
Financial Position
WestRock had cash and cash equivalents of $363 million as of the end of the second quarter of 2023, compared with $260 million as of the end of fiscal 2022. The company reported total debt of $9.5 billion at the end of the quarter under review, up from $7.6 billion at the end of fiscal 2022.
Net cash provided by operating activities in the second quarter of fiscal 2023 was $284 million, compared with $390 million in the prior-year quarter. During the reported quarter, WestRock paid $70 million as dividends and invested $282 million in capital expenditures.
Price Performance
Shares of WestRock have fallen 45.2% in the past year compared with the industry’s 34.8% decline.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
WestRock currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials space are Steel Dynamics, Inc. (STLD - Free Report) , PPG Industries, Inc. (PPG - Free Report) and Linde plc (LIN - Free Report) .
The Zacks Consensus Estimate for STLD's current-year earnings has been revised 24% upward in the past 60 days. Steel Dynamics’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 10.7%, on average. STLD has gained around 25% in a year.
PPG Industries currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for PPG's current-year earnings has been revised 11.7% upward in the past 60 days.
PPG Industries’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 6.8%, on average. PPG has gained around 5% in a year.
Linde currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 3.8% upward in the past 60 days.
Linde beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 5.9%, on average. LIN’s shares have gained roughly 16% in the past year.
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WestRock (WRK) Q2 Earnings Surpass Estimates, Sales Lag
WestRock Company (WRK) reported adjusted earnings of 77 cents per share in second-quarter fiscal 2023 (ended Mar 31, 2023), surpassing the Zacks Consensus Estimate of earnings of 51 cents per share. The bottom line however declined 34% year over year due to cost inflation, lower volumes, economic downtime and the Mahrt mill work stoppage.
Including one-time items, WRK reported a loss of $7.85 per share, compared with earnings of 15 cents per share reported in the prior-year quarter. The loss was primarily due to the $1.9 billion pre-tax, non-cash goodwill impairment and higher restructuring and other costs.
Lower volumes (excluding the Grupo Gondi acquisition,) cost inflation, economic downtime, higher non-cash pension costs, costs associated with the Mahrt mill work stoppage and business systems transformation costs also impacted results. These expenses were partially offset by higher selling price/mix, cost savings and contribution from the Grupo Gondi acquisition.
WestRock’s total revenues declined 1.9% year over year to $5.28 billion. The top line lagged the Zacks Consensus Estimate of $5.29 billion. The weaker-than-expected top-line results were mainly due to lower global paper segment sales. Net sales in the current year quarter included $328 million related to the consolidation of Gondi, S.A. de C.V.
WestRock Company Price, Consensus and EPS Surprise
WestRock Company price-consensus-eps-surprise-chart | WestRock Company Quote
The cost of sales was down 0.5% year over year to $4,357 million in the fiscal second quarter. Gross profit declined 8% year over year to $920 million.
Adjusted segment EBITDA was $823 million, compared with $871 million in the year-earlier quarter.
Improved EBITDA performance in the Corrugated Packaging, Consumer Packaging and Distribution segments was offset by lower EBITDA in the Global Paper segment.
Segment Performances
Sales in the Corrugated Packaging segment were up 13% year over year to $2,627 million during the quarter under review. Adjusted segment EBITDA increased 24% year over year to $408 million.
The Consumer Packaging segment reported sales of $1,265 million, up 1% year over year. Adjusted segment EBITDA rose 6% year over year to $219 million.
Sales in the Global Paper segment moved down 24% year over year to $1,168 million. Adjusted segment EBITDA plunged 39% year over year to $187 million.
The Distribution segment’s sales declined 15% year over year to $307 million. Adjusted segment EBITDA surged 67% year over year to $9.3 million.
Financial Position
WestRock had cash and cash equivalents of $363 million as of the end of the second quarter of 2023, compared with $260 million as of the end of fiscal 2022. The company reported total debt of $9.5 billion at the end of the quarter under review, up from $7.6 billion at the end of fiscal 2022.
Net cash provided by operating activities in the second quarter of fiscal 2023 was $284 million, compared with $390 million in the prior-year quarter. During the reported quarter, WestRock paid $70 million as dividends and invested $282 million in capital expenditures.
Price Performance
Shares of WestRock have fallen 45.2% in the past year compared with the industry’s 34.8% decline.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
WestRock currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials space are Steel Dynamics, Inc. (STLD - Free Report) , PPG Industries, Inc. (PPG - Free Report) and Linde plc (LIN - Free Report) .
Steel Dynamics currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for STLD's current-year earnings has been revised 24% upward in the past 60 days. Steel Dynamics’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 10.7%, on average. STLD has gained around 25% in a year.
PPG Industries currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for PPG's current-year earnings has been revised 11.7% upward in the past 60 days.
PPG Industries’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 6.8%, on average. PPG has gained around 5% in a year.
Linde currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 3.8% upward in the past 60 days.
Linde beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 5.9%, on average. LIN’s shares have gained roughly 16% in the past year.