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WestRock (WRK) Hits 52-Week High: What's Aiding Its Rally?

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WestRock Company (WRK - Free Report) shares scaled a new 52-week high of $48.96 on Mar 15 before closing the session lower at $48.60.

WRK has a market capitalization of $12.5 billion. The company’s shares have gained 77.1% over the past year compared with the industry’s 37.9% growth.


Zacks Investment Research
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What’s Driving WestRock?

Solid Demand in Key Markets: The company has been witnessing solid demand and a strong backlog in key end markets. Its consumer business remains robust, with sturdy growth in beverage, healthcare, and retail and food. WestRock will benefit from solid demand for corrugated packaging, containerboard, food and beverage consumer packaging, as well as industrial packaging, going forward.

The company’s overall packaging business is gaining from strong demand and the implementation of containerboard and boxboard price increases. Additionally, it has been benefiting from increasing customer demand for eco-friendly, fiber-based packaging solutions.

The global initiative to replace plastic remains the key growth driver for WestRock, supported by an estimated $9 billion total addressable market in North America and $50 billion globally.

Solid Balance Sheet: WestRock delivered an adjusted free cash flow of $933 million in fiscal 2023, driven primarily by working capital improvements and lower capital expenditure. The figure came within its guidance of $800 million to $1 billion.

In the first quarter of fiscal 2024, WestRock invested $247 million in capital expenditure and returned $78 million to stockholders in dividend payments.

The company had $3.4 billion of available liquidity from long-term committed credit facilities, and cash and cash equivalents as of Dec 31, 2023. It has been gaining from its cost-saving actions and contribution from recent acquisitions.

Strategic Investments and Acquisitions: WestRock continues to invest in businesses, which includes strategic capital projects that have attractive returns, and targeted mergers and acquisitions. It has been witnessing strong demand for containerboard and corrugated packaging in its Latin America business, with strong growth in the Brazil market.

The company will also reap the benefits of strategic capital projects in its mill and converting systems to improve the overall cost structure. These investments will enhance WestRock’s packaging capabilities in its served markets, while reducing exposures to export containerboard and low-margin SBS businesses.

WestRock also successfully started the new state-of-the-art 710,000-ton paper machine at Florence, SC, which replaces three old and obsolete machines.

In January 2023, the company announced plans to develop a corrugated box mill in Pleasant Prairie to meet rising customer demand in the Great Lakes region. This investment will allow WestRock to expand its production capacity and enhance its cost profile in the Great Lakes region. The new facility is projected to help cut manufacturing costs and waste, improving WestRock's total manufacturing cost profile, while also boosting sustainability through lower energy use and new technologies.

Zacks Rank & Stocks to Consider

WestRock currently sports a Zacks Rank #3 (Hold).

Some better-ranked stocks from the basic materials space are Ecolab Inc. (ECL - Free Report) , Carpenter Technology Corporation (CRS - Free Report) and Hawkins, Inc. (HWKN - Free Report) . ECL and CRS sport a Zacks Rank #1 (Strong Buy) at present, and HWKN has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ecolab’s 2024 earnings is pegged at $6.39 per share, indicating an increase of 22.7% from the prior year’s reported number. It has an average trailing four-quarter earnings surprise of 1.7%. ECL shares have gained 41.8% in a year.

The Zacks Consensus Estimate for Carpenter Technology’s 2024 earnings is pegged at $4.00 per share. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 14.3%. CRS shares have gained 33.5% in a year.

The Zacks Consensus Estimate for Hawkins’ fiscal 2024 earnings is pegged at $3.61 per share, indicating a year-over-year rise of 26.2%. The Zacks Consensus Estimate for HWKN’s current-year earnings has been revised 4.3% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 30.6%. The company’s shares have rallied 70% in the past year.

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