WestRock's (WRK) Earnings Beat Estimates in Q3, Down Y/Y

WestRock Company WRK delivered third-quarter fiscal 2020 (ended Jun 30, 2020) adjusted earnings of 76 cents per share, surpassing the Zacks Consensus Estimate of 44 cents. However, earnings plunged 31.5% from the prior-year quarter.

Including one-time items, the company reported earnings per share of 69 cents in the reported quarter, down 29.6% from the prior-year quarter.

Operational Update

WestRock’s total revenues slid 9.7% year over year to $4,236 million. Moreover, the revenue figure missed the Zacks Consensus Estimate of $4,357 million.

Cost of sales was down 6.3% year over year to $3,466 million in the fiscal third quarter. Gross profit declined 22.1% year over year to $770 million. Gross margin came in at 18% compared with the 21% reported in the prior-year period. Adjusted segment EBITDA was $708 million compared with the $858 million witnessed in the year-earlier quarter. Total segment income was around $323 million, down from the year-ago quarter’s $485 million.

WestRock Company Price, Consensus and EPS Surprise

WestRock Company Price, Consensus and EPS Surprise

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

Segmental Performance

Corrugated Packaging: Sales in the segment dipped 11.2% year over year to $2,729 million in the June-end quarter primarily on lower corrugated selling price/mix, lower volumes, and unfavorable impact of the coronavirus pandemic and foreign currency. Adjusted segment EBITDA decreased 25.2% year over year to $482 million.

Consumer Packaging: Sales in the segment were down 5.8% year over year to $1,553 million. This downside resulted from lower selling price/mix, dismal volumes, and unfavorable impact of the pandemic and foreign-currency translation. Adjusted segment EBITDA climbed 4.3% year over year to $243 million.

Financial Position

As of Jun 30, 2020, cash and cash equivalents were $292 million, significantly up from $152 million as of Sep 30, 2019. As of Jun 30, 2020, total debt was $10.1 billion, unchanged compared with total debt as of Sep 30, 2019. Cash flow from operations was $740 million during the fiscal third quarter compared with the year-earlier quarter’s $735 million. WestRock invested $244 million in capital expenditure and paid out $52 million in dividends in the reported quarter.

WestRock is focused on meeting customer demand and executing strategies for financial strength and substantial liquidity to counter the pandemic-related setbacks.

Price Performance

Shares of WestRock have gained 11% over the past three months, outperforming the industry’s growth of 8.6%.

Zacks Rank & Other Stocks to Consider

WestRock currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space include Equinox Gold Corp. EQX, Harmony Gold Mining Company Limited HMY and Northern Dynasty Minerals Ltd. NAK, each carrying a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Equinox Gold has an expected earnings growth rate of 65.5% for 2020. The company’s shares have surged 96.8% in the past year.

Harmony Gold has an estimated earnings growth rate of 264.3% for fiscal 2020. Its shares have soared 154.4% in a year’s time.

Northern Dynasty has a projected earnings growth rate of 28.6% for the current year. The company’s shares have skyrocketed 285.5% over the past year.

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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.

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