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WestRock (WRK) Q4 Earnings In Line, Revenues Fall Short

WestRock CompanyWRK reported fourth quarter fiscal 2015 (ended Sep 30, 2015) adjusted earnings of 93 cents per share, in line with the Zacks Consensus Estimate. Including restructuring charges of 30 cents, merger and acquisition costs of 18 cents and loss on extinguishment of debt of 1 cent, the company reported earnings of 44 cents per share compared with $1.06 in the year-ago quarter.

On Jul 1, WestRock was formed after the merger of MeadWestvaco and Rock-Tenn. After the completion of this transaction, RockTenn and MeadWestvaco became wholly owned subsidiaries of WestRock.

WestRock's total revenue surged 48.5% year over year to $3.87 billion. Revenues, however, missed the Zacks Consensus Estimate of $4.05 billion.

Segmental Performance

Corrugated Packaging: Sales in the segment increased 3.9% year over year to $1.99 billion in the quarter. Segment income decreased 14% year over year to $235.4 million.

Consumer Packaging: Sales in the segment improved significantly to $1.64 billion from $0.75 billion in the quarter. Segment income declined around 10.9% year over year to $77.7 million.

Specialty Chemicals: The segment reported sales of $256.5 million in the quarter. Segment income for the quarter was $33.6 million.

Land and Development: The segment reported sales of $45 million. The segment posted a loss of $3.4 million in the quarter.

Financial Position

WestRock had cash and cash equivalents of $228.3 million at the end of fiscal 2015 compared with $32.6 million as of fiscal 2014-end. The company generated cash flow from operations of $1.20 billion in fiscal 2015 compared with $1.15 billion in fiscal 2014. The company's total debt increased to $5.63 billion as of Sep 30, 2015 from $2.98 billion as of Sep 30, 2014.

Our View

WestRock stands to benefit from its investment in capacity, growth initiatives, spin off of the non-core Specialty business and shareholder friendly capital allocation strategy. Also, the recent acquisition of SP Fiber Holdings will assist the company to meet increasing demand for lighter weight containerboard and kraft paper while broadening its product offering.

Further, WestRock is separating its specialty chemicals business, Ingevity as it is not in line with the company's business. The spinoff will better position both businesses to pursue their respective operating priorities and strategies. The separation of the business is on track and is scheduled to be completed in Mar 2016.

However, unfavorable foreign currency translation and weak demand in Merchandising Display remain concerns for the company.

WestRock currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the sector include Resolute Forest Products Inc. RFP , Sappi Ltd. SPPJY and Stora Enso Oyj SEOAY . All of these stocks carry a Zacks Rank #2 (Buy).

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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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