WestRock Company (
WRK - Free Report) reported second-quarter fiscal 2018 (ended Mar 31, 2018) adjusted earnings of 83 cents per share, in-line with the Zacks Consensus Estimate. However, the figure logged a year-over-year improvement of 54%.
Including one-time items, the company posted earnings of 86 cents per share in the second quarter compared with 40 cents per share recorded in the prior-year period.
Operational Update
WestRock’s total revenues rose 10% year over year to $4,017 million. However, revenues missed the Zacks Consensus Estimate of $4,064 million. The year-over-year improvement in sales was primarily driven by increased sales in the Corrugated Packaging driven by higher selling price/mix and Consumer Packaging segments. This helped mitigate lower Land & Development sales and absence of net sales from the company’s former Home Health & Beauty (HH&B) business in the current-year quarter due to the sale of the same in April 2017.
Cost of sales went up 8% year over year to $3,220 million in the second quarter. Gross profit improved 18% to $797 million. Gross margin expanded 130 basis points to 19.8% in the quarter. Adjusted segment EBITDA was $669 million compared with $547 million reported in the prior-year quarter.
WestRock Company Price, Consensus and EPS Surprise
Financial Position
As of Mar 31, 2018, cash and cash equivalents were $266.5 million, down from $298 million as of Sep 30, 2017. As of Mar 31, 2018, total debt was $6,726.5 million, up from $6,544.8 million as of Sep 30, 2017. Cash flow from operations came in at $371.6 million in the reported quarter compared with $299.7 million recorded in the year-ago quarter.
During the quarter, WestRock completed the acquisition of all the assets of Plymouth Packaging, Inc. — a corrugated packaging company. Notably, the addition of Plymouth Packaging’s Box on Demand system will enhance WestRock’s differentiation in e-commerce and other custom applications, where on-site box making is required. The buyout will also fortify the company’s automated packaging systems business.
WestRock initiated integration planning for the planned acquisition of KapStone Paper and Packaging Corp. . Pursuant to customary closing conditions, the acquisition is expected to close by the end of the September quarter or during the December quarter. Upon conclusion, the buyout is anticipated to be immediately accretive to the company’s adjusted earnings and cash flow. The acquisition will help WestRock expand its presence in the western United States and broadens the company’s differentiated paper and packaging solutions portfolio with the addition of attractive paper grades and distribution capabilities.
With these acquisitions, the company is strengthening its capabilities and solutions offerings for customers.
WestRock stated that it has achieved $64 million in year-over-year productivity improvements in the fiscal second quarter, and a run rate of $975 million of synergy and performance improvements since its creation.
WestRock has outperformed the
industry with respect to price performance over the past six months. The stock has gained 6.7%, while the industry has recorded growth of 5.8%.
Zacks Rank & Stocks to Consider
Other top-ranked stocks in the same industry include Veritiv Corporation and Mondi plc (
MONDY - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy).
Veritiv has a long-term earnings growth rate of 6%. Its shares have gained 20% in the past six months.
Mondi plc has a long-term earnings growth rate of 6%. The company’s shares have appreciated 20% during the past six months.
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