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WestRock (WRK) Q3 Earnings & Revenues Top Estimates, Up Y/Y

WestRock CompanyWRK delivered third-quarter fiscal 2018 (ended Jun 30, 2018) adjusted earnings of $1.09 per share, ahead of the Zacks Consensus Estimate of $1.05. The reported figure also logged a year-over-year improvement of 47%.

Including one-time items, the company reported earnings of $1.03 per share in the third quarter compared with $1.29 per share recorded in the prior-year period.

Operational Update

WestRock's total revenues rose 12% year over year to $4,138 million, outpacing the Zacks Consensus Estimate of $4,123 million. The year-over-year improvement in sales was primarily driven by increased sales in the Corrugated Packaging driven by higher selling price as well as higher Consumer Packaging segment, which in turn was aided by the Multi Packaging Solutions International Limited ("MPS") acquisition.

WestRock Company Price, Consensus and EPS Surprise

WestRock Company price-consensus-eps-surprise-chart | WestRock Company Quote

Cost of sales went up 9% year over year to $3,264 million in the third quarter. Gross profit advanced 26% to $873 million. Gross margin expanded 230 basis points to 21.1% in the quarter. Adjusted segment EBITDA was $760 million compared with $598 million reported in the prior-year quarter. Adjusted operating income was $429 million, up 47% from $293 million in the prior-year quarter.

Segment Performance

Corrugated Packaging: Sales at the segment improved 6% year over year to $2,291 million in the quarter. Adjusted segment EBITDA increased 29% year over year to $485 million.

Consumer Packaging: Sales at the segment surged 21% to $1,845 million from the year-ago quarter. Adjusted segment EBITDA improved 18% year over year to $272 million.

Land and Development: The segment's sales came in at $64.8 million, a dip of 9% from $71 million in the prior-year quarter. Adjusted segment EBITDA for the segment was $10.3 million, a substantial improvement from the $0.4 million recorded in the prior-year quarter.

Financial Position

As of Jun 30, 2018, cash and cash equivalents were $453 million, up from $298 million as of Sep 30, 2017. As of Jun 30, 2018, total debt was $7,311 million, up from $6,563 million as of Sep 30, 2017. Cash flow from operations came in at $772 million in the reported quarter compared with $589 million recorded in the year-ago quarter.

During the reported quarter, WestRock invested $239 million in capital expenditures, paid $110 million in dividends and repurchased shares worth $101 million.

WestRock continued integration planning for the planned acquisition of rival KapStone Paper and Packaging Corp. KS . Pursuant to customary closing conditions, the acquisition is expected to close by the end of 2018. Upon conclusion, the buyout is anticipated to be immediately accretive to the company's adjusted earnings and cash flow. The buyout will help WestRock expand presence in the western United States and also broaden the company's differentiated paper and packaging solutions portfolio with the addition of attractive paper grades and distribution capabilities.

WestRock stated that it has achieved its aforementioned target of $1 billion of synergy and performance improvements since its creation.

Shares of WestRock have dipped 10.7% over the past six months, compared with the industry 's decline of 4%.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the same industry include Domtar Corporation UFS and UPM-Kymmene Corp. UPMKY . While Domtar carries a Zacks Rank #1 (Strong Buy), UPM-Kymmene carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Domtar has a long-term earnings growth rate of 5%. Its shares have gained 3% in the past six months.

UPM-Kymmene Corp. (UPMKY) has a long-term earnings growth rate of 10%. The company's shares have appreciated 9% in the past six months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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