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WestRock (WRK) Beats on Q2 Earnings, Revenue Estimates
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WestRock Company (WRK - Free Report) reported second-quarter fiscal 2017 (ended Mar 31, 2017) adjusted earnings of 54 cents per share beating the Zacks Consensus Estimate of 47 cents by a margin of 15%.
Including one-time items, the company reported earnings of 40 cents per share in the quarter compared with 22 cents in the prior-year quarter.
Operational Update
WestRock’s total revenue rose 4.7 % year over year to $3.66 million. Moreover, revenues beat the Zacks Consensus Estimate of $3.55 billion. The year-over-year improvement in sales was primarily driven by increased sales in Corrugated Packaging segment as well as Land and Development segment that helped mitigate the decline in the Consumer Packaging segment’s sales.
Cost of sales went up 5% year over year to $2.98 billion in the quarter. Gross profit increased 3% to $675 million. Gross margin contracted 30 basis points (bps) to 18.5% in the quarter. Adjusted operating income was $277 million compared with $262 million in the prior-year quarter. Adjusted operating margin was 7.6% in the quarter compared with 7.5% in the prior-year quarter.
Westrock Company Price, Consensus and EPS Surprise
Corrugated Packaging: Sales at the segment improved 7% year over year to $2.07 billion in the quarter. Adjusted segment EBITDA declined 3% year over year to $305 million.
Consumer Packaging: Sales at the segment dipped 2% to $1.55 billion from the year-ago quarter. Adjusted segment EBITDA improved 5% year over year to $235 million.
Land and Development: The segment’s sales were $100 million compared with $19 million in the prior-year quarter. Adjusted segment EBITDA for the segment was $18 million compared with a loss of $3.8 million in the prior-year quarter.
Financial Position
The company generated cash flow from operations of $300 million in the reported quarter compared with $252 million in the prior-year quarter. The company had $385 million in cash and cash equivalents at the end fiscal second-quarter 2017 compared with $340.9 million at fiscal 2016 end. The company’s total debt was $5.67 billion at the quarter end compared with $5.79 billion at fiscal 2016 end.
During fiscal second-quarter 2017, in sync with its balanced capital allocation strategy, WestRock invested $189 million in capital expenditures and paid $101 million in dividends and repurchased shares worth $25 million.
In the quarter, WestRock achieved $103 million in year-over-year productivity improvements, and annual run rate of $675 million of synergy and performance enhancements.
In line with constant strategic focus on core paper and packaging solutions businesses, WestRock completed the sale of Home, Health and Beauty business to Silgan Holdings Inc. (SLGN - Free Report) generating 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 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. The buyout is anticipated to close in the next quarter.
In the past year, the company has made several investments that further strengthened and enhanced portfolio, while divesting businesses that were not core to its goal of being a premier provider of paper and packaging solutions. Thus, WestRock has outperformed the Zacks categorized Paper and Related Products sub industry in the past one year. The company has gained 52.3%, while the industry witnessed an increase of 24%.
Zacks Rank & Key Pick
WestRock currently carries a Zacks Rank #3 (Hold).
United States Steel Corporation has delivered an impressive positive earnings surprise of 557.43%. Methanex has an average positive earnings surprise of 28.76% in the trailing four quarters.
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WestRock (WRK) Beats on Q2 Earnings, Revenue Estimates
WestRock Company (WRK - Free Report) reported second-quarter fiscal 2017 (ended Mar 31, 2017) adjusted earnings of 54 cents per share beating the Zacks Consensus Estimate of 47 cents by a margin of 15%.
Including one-time items, the company reported earnings of 40 cents per share in the quarter compared with 22 cents in the prior-year quarter.
Operational Update
WestRock’s total revenue rose 4.7 % year over year to $3.66 million. Moreover, revenues beat the Zacks Consensus Estimate of $3.55 billion. The year-over-year improvement in sales was primarily driven by increased sales in Corrugated Packaging segment as well as Land and Development segment that helped mitigate the decline in the Consumer Packaging segment’s sales.
Cost of sales went up 5% year over year to $2.98 billion in the quarter. Gross profit increased 3% to $675 million. Gross margin contracted 30 basis points (bps) to 18.5% in the quarter. Adjusted operating income was $277 million compared with $262 million in the prior-year quarter. Adjusted operating margin was 7.6% in the quarter compared with 7.5% in the prior-year quarter.
Westrock Company Price, Consensus and EPS Surprise
Westrock Company Price, Consensus and EPS Surprise | Westrock Company Quote
Segmental Performance
Corrugated Packaging: Sales at the segment improved 7% year over year to $2.07 billion in the quarter. Adjusted segment EBITDA declined 3% year over year to $305 million.
Consumer Packaging: Sales at the segment dipped 2% to $1.55 billion from the year-ago quarter. Adjusted segment EBITDA improved 5% year over year to $235 million.
Land and Development: The segment’s sales were $100 million compared with $19 million in the prior-year quarter. Adjusted segment EBITDA for the segment was $18 million compared with a loss of $3.8 million in the prior-year quarter.
Financial Position
The company generated cash flow from operations of $300 million in the reported quarter compared with $252 million in the prior-year quarter. The company had $385 million in cash and cash equivalents at the end fiscal second-quarter 2017 compared with $340.9 million at fiscal 2016 end. The company’s total debt was $5.67 billion at the quarter end compared with $5.79 billion at fiscal 2016 end.
During fiscal second-quarter 2017, in sync with its balanced capital allocation strategy, WestRock invested $189 million in capital expenditures and paid $101 million in dividends and repurchased shares worth $25 million.
In the quarter, WestRock achieved $103 million in year-over-year productivity improvements, and annual run rate of $675 million of synergy and performance enhancements.
In line with constant strategic focus on core paper and packaging solutions businesses, WestRock completed the sale of Home, Health and Beauty business to Silgan Holdings Inc. (SLGN - Free Report) generating 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 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. The buyout is anticipated to close in the next quarter.
In the past year, the company has made several investments that further strengthened and enhanced portfolio, while divesting businesses that were not core to its goal of being a premier provider of paper and packaging solutions. Thus, WestRock has outperformed the Zacks categorized Paper and Related Products sub industry in the past one year. The company has gained 52.3%, while the industry witnessed an increase of 24%.
Zacks Rank & Key Pick
WestRock currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the same industry include United States Steel Corporation (X - Free Report) and Methanex Corporation (MEOH - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
United States Steel Corporation has delivered an impressive positive earnings surprise of 557.43%. Methanex has an average positive earnings surprise of 28.76% in the trailing four quarters.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>