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Smurfit Westrock to Gain From Asset Optimization Amid Cost Woes
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Smurfit Westrock Plc (SW - Free Report) is gaining from its focus on asset optimization and business improvement initiatives. The company has been undergoing significant transformation since 2023, wherein it has closed underperforming facilities, divested non-core assets and streamlined operations to drive efficiency and cost savings. These efforts are expected to position the company for long-term growth and profitability.
However, SW is facing headwinds from merger-related costs, and higher freight and chemicals costs. These are likely to persist and impact its margins in the coming quarters. Labor shortages and supply-chain issues are other woes.
Factors Driving Smurfit Westrock’s Stock
Combined Potential to Enhance Growth: Smurfit Westrock was formed by the merger of two major paper and packaging industry players, Smurfit Kappa and WestRock, on July 5, 2024.
SW is set to deliver the combined potential of Smurfit Kappa and WestRock. Smurfit WestRock has an unmatched geographic reach spanning 42 countries. Given this scale, and equipped with both WestRock’s and Smurfit Kappa’s highly complementary portfolios and innovative sustainability capabilities, the merged entity is likely to be the global “Go-To” packaging partner for companies and customers across the globe.
The company boasts a well-invested asset base with numerous opportunities identified across its operations. In the first quarter of 2025, Smurfit Westrock made investments in containerboard, corrugated and consumer systems across three regions. Smurfit Westrock expanded its Bag-in-Box offering in Spain and the United States, upgrading mill systems in several countries for efficiency, capacity and environmental improvements, and implementing state-of-the-art converting equipment to reduce costs and enhance innovative offerings.
Smurfit Westrock is already seeing the initial results of the actions taken. After the first quarter of 2024, SW affirmed its $400-million synergy target for the first year of operation.
Focus on Asset Optimization: The company is focused on comprehensive asset optimization and business improvement initiatives. In sync with that, Smurfit Westrock closed underperforming facilities, including 32 packaging facilities, closed three mills and divested four mills since the start of 2023. In the first quarter of 2025, SW closed four mills with a capacity reduction of approximately 600 kt.
Smurfit Westrock also optimized its packaging footprint through significant restructuring actions, including plant closures in Portland, Oregon and Chicago, IL, alongside consultations at two German plants. These moves are expected to drive operational efficiencies, yield cost savings and enhance resource allocation for the company by focusing on core facilities. This is likely to position SW for long-term growth and profitability.
Demand for Packaging Solutions: Smurfit WestRock will gain from the growing demand for sustainable, fiber-based packaging solutions. Its consumer business remains robust, with growth in beverage, healthcare, and retail and food. SW’s overall packaging business is gaining from strong demand, and the implementation of containerboard and boxboard price increases.
The company also stands to gain from strong growth in e-commerce activities that continue to support demand for packaging solutions. SW is focused on developing sustainable packaging solutions for its customers to help them reduce their environmental footprint. Smurfit Westrock will benefit from solid demand for corrugated packaging, containerboard, food and beverage consumer packaging, and industrial packaging.
The preference for environmentally friendly biodegradable packaging materials is witnessing a steady rise globally, courtesy of customers’ increasing awareness of environmental issues. According to Statista, global e-commerce revenues are expected to reach $4.32 trillion in 2025, and witness a compound annual growth rate (CAGR) of 8.02% between 2025 and 2029.
Near-Term Concerns for SW
In the first quarter of 2025, Smurfit WestRock’s cost of sales soared 173.9% year over year. Its selling, general and administrative costs also increased. The company recorded transaction and integration-related costs of $395 million associated with the collaboration in 2024. The merger-related costs are expected to be worrisome for SW in the upcoming quarters and disrupt the free cash flow margin.
Smurfit Westrock continues to face higher freight, wage and chemical costs. This will continue to impact its margins. Meanwhile, labor shortages and supply-chain issues have been disrupting production and impacting shipments to customers. This situation is anticipated to persist and impair SW’s ability to meet the high demand. Moreover, the unfavorable impacts of currency translations are expected to hurt its EBITDA performance.
Smurfit Westrock Stock’s Price Performance
Shares of the company have declined 14.8% in the past six months compared with the industry’s 8% fall.
Image Source: Zacks Investment Research
SW’s Zacks Rank & Stocks to Consider
Smurfit Westrock currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation (CRS - Free Report) , SSR Mining Inc. (SSRM - Free Report) and Idaho Strategic Resources (IDR - Free Report) . Carpenter Technology currently sports a Zacks Rank #1 (Strong Buy), whereas SSR Mining and Idaho Strategic Resources carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has an average trailing four-quarter earnings surprise of 11.1%. The Zacks Consensus Estimate for CRS’s 2025 earnings is pegged at $7.20 per share, which indicates year-over-year growth of 51.9%. Carpenter Technology shares have skyrocketed 111% in the last year.
SSR Mining has an average trailing four-quarter earnings surprise of 58.8%. The Zacks Consensus Estimate for SSRM’s 2025 earnings is pegged at $1.14 per share, implying year-over-year growth of 307%. SSR Mining’s stock has soared 88.6% in the last year.
Idaho Strategic has an average trailing four-quarter earnings surprise of 21.7%. The Zacks Consensus Estimate for Idaho Strategic’s 2025 earnings is pegged at 78 cents per share, indicating year-over-year growth of 16.4%. IDR shares have jumped 24.5% in the last year.
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Smurfit Westrock to Gain From Asset Optimization Amid Cost Woes
Smurfit Westrock Plc (SW - Free Report) is gaining from its focus on asset optimization and business improvement initiatives. The company has been undergoing significant transformation since 2023, wherein it has closed underperforming facilities, divested non-core assets and streamlined operations to drive efficiency and cost savings. These efforts are expected to position the company for long-term growth and profitability.
However, SW is facing headwinds from merger-related costs, and higher freight and chemicals costs. These are likely to persist and impact its margins in the coming quarters. Labor shortages and supply-chain issues are other woes.
Factors Driving Smurfit Westrock’s Stock
Combined Potential to Enhance Growth: Smurfit Westrock was formed by the merger of two major paper and packaging industry players, Smurfit Kappa and WestRock, on July 5, 2024.
SW is set to deliver the combined potential of Smurfit Kappa and WestRock. Smurfit WestRock has an unmatched geographic reach spanning 42 countries. Given this scale, and equipped with both WestRock’s and Smurfit Kappa’s highly complementary portfolios and innovative sustainability capabilities, the merged entity is likely to be the global “Go-To” packaging partner for companies and customers across the globe.
The company boasts a well-invested asset base with numerous opportunities identified across its operations. In the first quarter of 2025, Smurfit Westrock made investments in containerboard, corrugated and consumer systems across three regions. Smurfit Westrock expanded its Bag-in-Box offering in Spain and the United States, upgrading mill systems in several countries for efficiency, capacity and environmental improvements, and implementing state-of-the-art converting equipment to reduce costs and enhance innovative offerings.
Smurfit Westrock is already seeing the initial results of the actions taken. After the first quarter of 2024, SW affirmed its $400-million synergy target for the first year of operation.
Focus on Asset Optimization: The company is focused on comprehensive asset optimization and business improvement initiatives. In sync with that, Smurfit Westrock closed underperforming facilities, including 32 packaging facilities, closed three mills and divested four mills since the start of 2023. In the first quarter of 2025, SW closed four mills with a capacity reduction of approximately 600 kt.
Smurfit Westrock also optimized its packaging footprint through significant restructuring actions, including plant closures in Portland, Oregon and Chicago, IL, alongside consultations at two German plants. These moves are expected to drive operational efficiencies, yield cost savings and enhance resource allocation for the company by focusing on core facilities. This is likely to position SW for long-term growth and profitability.
Demand for Packaging Solutions: Smurfit WestRock will gain from the growing demand for sustainable, fiber-based packaging solutions. Its consumer business remains robust, with growth in beverage, healthcare, and retail and food. SW’s overall packaging business is gaining from strong demand, and the implementation of containerboard and boxboard price increases.
The company also stands to gain from strong growth in e-commerce activities that continue to support demand for packaging solutions. SW is focused on developing sustainable packaging solutions for its customers to help them reduce their environmental footprint. Smurfit Westrock will benefit from solid demand for corrugated packaging, containerboard, food and beverage consumer packaging, and industrial packaging.
The preference for environmentally friendly biodegradable packaging materials is witnessing a steady rise globally, courtesy of customers’ increasing awareness of environmental issues. According to Statista, global e-commerce revenues are expected to reach $4.32 trillion in 2025, and witness a compound annual growth rate (CAGR) of 8.02% between 2025 and 2029.
Near-Term Concerns for SW
In the first quarter of 2025, Smurfit WestRock’s cost of sales soared 173.9% year over year. Its selling, general and administrative costs also increased. The company recorded transaction and integration-related costs of $395 million associated with the collaboration in 2024. The merger-related costs are expected to be worrisome for SW in the upcoming quarters and disrupt the free cash flow margin.
Smurfit Westrock continues to face higher freight, wage and chemical costs. This will continue to impact its margins. Meanwhile, labor shortages and supply-chain issues have been disrupting production and impacting shipments to customers. This situation is anticipated to persist and impair SW’s ability to meet the high demand. Moreover, the unfavorable impacts of currency translations are expected to hurt its EBITDA performance.
Smurfit Westrock Stock’s Price Performance
Shares of the company have declined 14.8% in the past six months compared with the industry’s 8% fall.
SW’s Zacks Rank & Stocks to Consider
Smurfit Westrock currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation (CRS - Free Report) , SSR Mining Inc. (SSRM - Free Report) and Idaho Strategic Resources (IDR - Free Report) . Carpenter Technology currently sports a Zacks Rank #1 (Strong Buy), whereas SSR Mining and Idaho Strategic Resources carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has an average trailing four-quarter earnings surprise of 11.1%. The Zacks Consensus Estimate for CRS’s 2025 earnings is pegged at $7.20 per share, which indicates year-over-year growth of 51.9%. Carpenter Technology shares have skyrocketed 111% in the last year.
SSR Mining has an average trailing four-quarter earnings surprise of 58.8%. The Zacks Consensus Estimate for SSRM’s 2025 earnings is pegged at $1.14 per share, implying year-over-year growth of 307%. SSR Mining’s stock has soared 88.6% in the last year.
Idaho Strategic has an average trailing four-quarter earnings surprise of 21.7%. The Zacks Consensus Estimate for Idaho Strategic’s 2025 earnings is pegged at 78 cents per share, indicating year-over-year growth of 16.4%. IDR shares have jumped 24.5% in the last year.