It has been about a month since the last earnings report for Westrock Company . Shares have lost about 4.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
WestRock Beats on Q1 Earnings, Bolsters Portfolio
WestRock reported first-quarter fiscal 2017 (ended Dec 31, 2016) adjusted earnings of $0.47 per share beating the Zacks Consensus Estimate of $0.45, by posting a positive earnings surprise of 4%.
Including one-time items, the company reported earnings of $0.32 per share in the quarter. This includes the impact of restructuring charges of $0.24 per share and one-time state tax benefit of $0.09 per share.
Operational Update
WestRock’s total revenue edged down 0.7% year over year to $3,447 million. Moreover, revenues missed the Zacks Consensus Estimate of $3,479 million.
Cost of sales went up 1% year over year to $2,856 million in the quarter. Gross profit dropped 10% to $591 million. Gross margin expanded 170 basis points (bps) to 17.2% in the quarter. Adjusted operating income was $202 million compared with $266 million in the prior-year quarter. Adjusted operating margin was 5.9% in the quarter, down 180 bps year over year.
Segmental Performance
Corrugated Packaging: Sales at the segment improved 56% year over year to $1,944 million in the quarter. Adjusted segment EBITDA declined 12% year over year to $287 million.
Consumer Packaging: Sales at the segment dipped 2% to $1,511 million from the year-ago quarter. Adjusted segment EBITDA edged down 2% year over year to $215 million.
Land and Development: The segment’s sales were $54 million compared with $15 million in the prior-year quarter. Adjusted segment EBITDA for the segment was $1.9 million compared with $1.4 million in the prior-year quarter.
Financial Position
The company generated cash flow from operations of $517 million in the reported quarter compared with $523 million in the prior-year quarter. The company had $493 million in cash and cash equivalents at the end fiscal first-quarter 2017 compared with $340.9 million at fiscal 2016 end. The company’s total debt was $5.77 billion at the quarter end compared with $5.79 billion at fiscal 2016 end.
During fiscal first-quarter 2017, in sync with its balanced capital allocation strategy, WestRock invested $176 million in capital expenditures and paid $100 million in dividends and repurchased 1.35 million shares for $68 million.
In the quarter, WestRock achieved $85 million in year-over-year productivity improvements, and annual run rate of $580 million of synergy and performance improvements.
In line with its constant strategic focus on its core paper and packaging solutions businesses, WestRock has agreed to sell its Home, Health and Beauty business to Silgan Holdings Inc. for $1.025 billion in cash plus the assumption of approximately $25 million in foreign pension liability. WestRock anticipates receiving net after-tax proceeds of approximately $1 billion.
Further, WestRock announced that it will acquire Multi Packaging Solutions International Limited for $18.00 per share in cash and the assumption of an estimated $873 million in net debt, for a total enterprise value of $2.28 billion. The offer price of $18 per share represents a 25% premium to Multi Packaging Solutions' closing price of $14.39 on Jan 23. Multi Packaging Solutions is a leading global provider of print-based specialty packaging solutions. The acquisition will be immediately accretive to WestRock’s results, both on an earnings per share basis and cash flow basis. The acquisition will strengthen the company’s differentiated portfolio of paper and packaging solutions.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 13.1% due to these changes.
VGM Scores
At this time, Westrock's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
Image: Bigstock
Why Is Westrock (WRK) Down 4.4% Since the Last Earnings Report?
It has been about a month since the last earnings report for Westrock Company . Shares have lost about 4.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
WestRock Beats on Q1 Earnings, Bolsters Portfolio
WestRock reported first-quarter fiscal 2017 (ended Dec 31, 2016) adjusted earnings of $0.47 per share beating the Zacks Consensus Estimate of $0.45, by posting a positive earnings surprise of 4%.
Including one-time items, the company reported earnings of $0.32 per share in the quarter. This includes the impact of restructuring charges of $0.24 per share and one-time state tax benefit of $0.09 per share.
Operational Update
WestRock’s total revenue edged down 0.7% year over year to $3,447 million. Moreover, revenues missed the Zacks Consensus Estimate of $3,479 million.
Cost of sales went up 1% year over year to $2,856 million in the quarter. Gross profit dropped 10% to $591 million. Gross margin expanded 170 basis points (bps) to 17.2% in the quarter. Adjusted operating income was $202 million compared with $266 million in the prior-year quarter. Adjusted operating margin was 5.9% in the quarter, down 180 bps year over year.
Segmental Performance
Corrugated Packaging: Sales at the segment improved 56% year over year to $1,944 million in the quarter. Adjusted segment EBITDA declined 12% year over year to $287 million.
Consumer Packaging: Sales at the segment dipped 2% to $1,511 million from the year-ago quarter. Adjusted segment EBITDA edged down 2% year over year to $215 million.
Land and Development: The segment’s sales were $54 million compared with $15 million in the prior-year quarter. Adjusted segment EBITDA for the segment was $1.9 million compared with $1.4 million in the prior-year quarter.
Financial Position
The company generated cash flow from operations of $517 million in the reported quarter compared with $523 million in the prior-year quarter. The company had $493 million in cash and cash equivalents at the end fiscal first-quarter 2017 compared with $340.9 million at fiscal 2016 end. The company’s total debt was $5.77 billion at the quarter end compared with $5.79 billion at fiscal 2016 end.
During fiscal first-quarter 2017, in sync with its balanced capital allocation strategy, WestRock invested $176 million in capital expenditures and paid $100 million in dividends and repurchased 1.35 million shares for $68 million.
In the quarter, WestRock achieved $85 million in year-over-year productivity improvements, and annual run rate of $580 million of synergy and performance improvements.
In line with its constant strategic focus on its core paper and packaging solutions businesses, WestRock has agreed to sell its Home, Health and Beauty business to Silgan Holdings Inc. for $1.025 billion in cash plus the assumption of approximately $25 million in foreign pension liability. WestRock anticipates receiving net after-tax proceeds of approximately $1 billion.
Further, WestRock announced that it will acquire Multi Packaging Solutions International Limited for $18.00 per share in cash and the assumption of an estimated $873 million in net debt, for a total enterprise value of $2.28 billion. The offer price of $18 per share represents a 25% premium to Multi Packaging Solutions' closing price of $14.39 on Jan 23. Multi Packaging Solutions is a leading global provider of print-based specialty packaging solutions. The acquisition will be immediately accretive to WestRock’s results, both on an earnings per share basis and cash flow basis. The acquisition will strengthen the company’s differentiated portfolio of paper and packaging solutions.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 13.1% due to these changes.
Westrock Company Price and Consensus
Westrock Company Price and Consensus | Westrock Company Quote
VGM Scores
At this time, Westrock's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.