It has been about a month since the last earnings report for WestRock (WRK - Free Report) . Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is WestRock due for a pullback? 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's Earnings Beat Estimates in Q3, Down Y/Y
WestRock delivered third-quarter fiscal 2020 adjusted earnings of 76 cents per share, surpassing the Zacks Consensus Estimate of 44 cents. However, earnings plunged 31.5% from the prior-year quarter.
Including one-time items, the company reported earnings per share of 69 cents in the reported quarter, down 29.6% from the prior-year quarter.
WestRock’s total revenues slid 9.7% year over year to $4,236 million. Moreover, the revenue figure missed the Zacks Consensus Estimate of $4,357 million.
Cost of sales was down 6.3% year over year to $3,466 million in the fiscal third quarter. Gross profit declined 22.1% year over year to $770 million. Gross margin came in at 18% compared with the 21% reported in the prior-year period. Adjusted segment EBITDA was $708 million compared with the $858 million witnessed in the year-earlier quarter. Total segment income was around $323 million, down from the year-ago quarter’s $485 million.
Corrugated Packaging: Sales in the segment dipped 11.2% year over year to $2,729 million in the June-end quarter primarily on lower corrugated selling price/mix, lower volumes, and unfavorable impact of the coronavirus pandemic and foreign currency. Adjusted segment EBITDA decreased 25.2% year over year to $482 million.
Consumer Packaging: Sales in the segment were down 5.8% year over year to $1,553 million. This downside resulted from lower selling price/mix, dismal volumes, and unfavorable impact of the pandemic and foreign-currency translation. Adjusted segment EBITDA climbed 4.3% year over year to $243 million.
As of Jun 30, 2020, cash and cash equivalents were $292 million, significantly up from $152 million as of Sep 30, 2019. As of Jun 30, 2020, total debt was $10.1 billion, unchanged compared with total debt as of Sep 30, 2019. Cash flow from operations was $740 million during the fiscal third quarter compared with the year-earlier quarter’s $735 million. WestRock invested $244 million in capital expenditure and paid out $52 million in dividends in the reported quarter.
WestRock is focused on meeting customer demand and executing strategies for financial strength and substantial liquidity to counter the pandemic-related setbacks.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 24.88% due to these changes.
Currently, WestRock has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, WestRock has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.