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WestRock (WRK) Bets on Packaging Demand Amid Inflated Costs
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WestRock Company (WRK - Free Report) is poised to gain from strong growth in e-commerce activities amid the pandemic. The consumer packaging business is benefiting from fiber-based packaging solutions and significant demand in food, food service and beverage packaging categories. Its corrugated packaging business will gain on higher demand from distribution, industrial and agricultural customers as the economy gradually recovers. However, weak demand in few markets and cost inflation remain concerns in the near term.
Packaging Demand Remains Robust
WestRock’s corrugated packaging business is poised to gain from improved box shipment, and increased demand from distribution, industrial and agricultural customers as the economy gradually recovers. E-commerce demand remains strong across all channels and momentum will continue, particularly on account of the coronavirus pandemic. Consumer packaging business is gaining from sustainable paper and packaging options as well as significant demand in food, food service, and beverage packaging categories due to the pandemic.
Capital Projects to Fuel Growth
WestRock continues to invest in business, which includes strategic capital projects that have attractive returns, and targeted mergers and acquisitions. The company expects capital expenditures for fiscal 2021 between $800 million and $900 million. Its Specialty kraft paper business is gaining from customers’ increased preference for natural fiber-based packaging over plastic bags. In Brazil, it has been witnessing strong demand for containerboard and corrugated packaging. WestRock is well-poised to capitalize on this trend, with the ramp-up of Porto Feliz box plant and the completion of the Tres Barras mill upgrade project in the first half of fiscal 2021.
The company also successfully started the new state-of-the-art 710,000 ton paper machine paper machine at Florence, SC, which replaces three old and obsolete machines. The company had also announced that it is reconfiguring its North Charleston, SC, paper mill to improve the long-term competitiveness of the mill. The move is expected to increase the company’s annual EBITDA, primarily owing to the reduction in operating costs. These strategic investments are anticipated to contribute approximately $125 million of EBITDA in fiscal year 2021 and a similar amount in fiscal year 2022.
Acquisitions to Aid Growth
During fiscal 2018 and 2019, the company completed acquisitions of Schlüter, Plymouth Packaging and rival KapStone Paper and Packaging Corp that expanded its product offerings and geographic presence. The integration of KapStone Paper, the most notable buyout among these, is on track. The company anticipates cost synergies and performance improvements of $200 million by the end of fiscal 2021. KapStone’s corrugated packaging operations enhances WestRock’s North American corrugated packaging business and provides complementary products.
Primary Headwinds
The pandemic has disrupted demand patterns across few of WestRock’s businesses. Demand in foodservice remains impacted by uncertainty in timing of reopening of restaurants, schools and other services. Commercial print demand is also likely to be restrained due to limited public events and reduced retail and direct mail advertising. Luxury goods have also been hit hard. Further, the company expects modest sequential inflation across recycled fiber, chemical, and transportation costs in the near term.
Price Performance
Shares of WestRock have soared 115.8% over the past year, compared with the industry’s rally of 94.6%.
Positive Earnings Growth Estimates
The company’s earnings estimate for fiscal 2021 is currently pegged at $3.46, suggesting year-over-year growth of 25.4%. The same for fiscal 2022 stnads at $4.82, indicating year-over-year improvement of 39.4%.
Zacks Rank & Stocks to Consider
WestRock currently carries a Zacks Rank #3 (Hold).
ArcelorMittal has a projected earnings growth rate of 984.7% for the current fiscal year. The company’s shares have soared nearly 179% in the past year.
Celanese has an expected earnings growth rate of 68.3% for the current fiscal year. The company’s shares have rallied around 90% over the past year.
Dow has an estimated earnings growth rate of 261.6% for the current fiscal year. The company’s shares have gained roughly 75% in a year’s time.
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WestRock (WRK) Bets on Packaging Demand Amid Inflated Costs
WestRock Company (WRK - Free Report) is poised to gain from strong growth in e-commerce activities amid the pandemic. The consumer packaging business is benefiting from fiber-based packaging solutions and significant demand in food, food service and beverage packaging categories. Its corrugated packaging business will gain on higher demand from distribution, industrial and agricultural customers as the economy gradually recovers. However, weak demand in few markets and cost inflation remain concerns in the near term.
Packaging Demand Remains Robust
WestRock’s corrugated packaging business is poised to gain from improved box shipment, and increased demand from distribution, industrial and agricultural customers as the economy gradually recovers. E-commerce demand remains strong across all channels and momentum will continue, particularly on account of the coronavirus pandemic. Consumer packaging business is gaining from sustainable paper and packaging options as well as significant demand in food, food service, and beverage packaging categories due to the pandemic.
Capital Projects to Fuel Growth
WestRock continues to invest in business, which includes strategic capital projects that have attractive returns, and targeted mergers and acquisitions. The company expects capital expenditures for fiscal 2021 between $800 million and $900 million. Its Specialty kraft paper business is gaining from customers’ increased preference for natural fiber-based packaging over plastic bags. In Brazil, it has been witnessing strong demand for containerboard and corrugated packaging. WestRock is well-poised to capitalize on this trend, with the ramp-up of Porto Feliz box plant and the completion of the Tres Barras mill upgrade project in the first half of fiscal 2021.
The company also successfully started the new state-of-the-art 710,000 ton paper machine paper machine at Florence, SC, which replaces three old and obsolete machines. The company had also announced that it is reconfiguring its North Charleston, SC, paper mill to improve the long-term competitiveness of the mill. The move is expected to increase the company’s annual EBITDA, primarily owing to the reduction in operating costs. These strategic investments are anticipated to contribute approximately $125 million of EBITDA in fiscal year 2021 and a similar amount in fiscal year 2022.
Acquisitions to Aid Growth
During fiscal 2018 and 2019, the company completed acquisitions of Schlüter, Plymouth Packaging and rival KapStone Paper and Packaging Corp that expanded its product offerings and geographic presence. The integration of KapStone Paper, the most notable buyout among these, is on track. The company anticipates cost synergies and performance improvements of $200 million by the end of fiscal 2021. KapStone’s corrugated packaging operations enhances WestRock’s North American corrugated packaging business and provides complementary products.
Primary Headwinds
The pandemic has disrupted demand patterns across few of WestRock’s businesses. Demand in foodservice remains impacted by uncertainty in timing of reopening of restaurants, schools and other services. Commercial print demand is also likely to be restrained due to limited public events and reduced retail and direct mail advertising. Luxury goods have also been hit hard. Further, the company expects modest sequential inflation across recycled fiber, chemical, and transportation costs in the near term.
Price Performance
Shares of WestRock have soared 115.8% over the past year, compared with the industry’s rally of 94.6%.
Positive Earnings Growth Estimates
The company’s earnings estimate for fiscal 2021 is currently pegged at $3.46, suggesting year-over-year growth of 25.4%. The same for fiscal 2022 stnads at $4.82, indicating year-over-year improvement of 39.4%.
Zacks Rank & Stocks to Consider
WestRock currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space include ArcelorMittal (MT - Free Report) , Celanese Corp. (CE - Free Report) and Dow Inc. (DOW - Free Report) . All of these stocks flaunt a Zacks Rank #1 (Strong Buy) currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
ArcelorMittal has a projected earnings growth rate of 984.7% for the current fiscal year. The company’s shares have soared nearly 179% in the past year.
Celanese has an expected earnings growth rate of 68.3% for the current fiscal year. The company’s shares have rallied around 90% over the past year.
Dow has an estimated earnings growth rate of 261.6% for the current fiscal year. The company’s shares have gained roughly 75% in a year’s time.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency have sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>