What's in the Offing for WestRock's (WRK) Q2 Earnings?

WestRock Company WRK is set to report second-quarter fiscal 2020 results on May 5, before the opening bell.

The company has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in all of the trailing four quarters, the average beat being 10.01%.

Which Way are Estimates Treading?

The Zacks Consensus Estimate for WestRock’s fiscal second-quarter revenues is pegged at $4,485 million, suggesting a decline of 3% from the year-ago quarter. The same for earnings per share is pinned at 60 cents, indicating a year-over-year fall of 25%.

The Zacks Consensus Estimate for the company’s fiscal second-quarter earnings moved south over the past 60 days.

Will the upcoming earnings release provide a boost to WestRock’s stock? Let’s take a look.

Key Factors

Packaging products are essential for the distribution of food, beverage and pharmaceutical products. Further, the coronavirus pandemic has fueled e-commerce growth as consumers’ demand for online grocery, beverage and pharmaceuticals delivery services has skyrocketed following the travel restrictions imposed by governments all over. Consequently, the company’s Consumer Packaging segment is expected to have benefited in the fiscal second quarter from the elevated demand for the packaging of food, beverages, dairy products, confectionery, health, and other household consumer, commercial and industrial products.

WestRock acquired KapStone Paper and Packaging Corp in 2019 and the integration is on track. The acquisition has helped the company cement its presence in the Western United States. Further, the company continues to boost its North American corrugated packaging business margins. These moves are likely to have contributed to the fiscal second-quarter performance. In addition, productivity, performance-improvement programs across its manufacturing footprint and cost savings from capital investments are anticipated to have aided the company’s performance during the quarter under review.

However, WestRock’s fiscal second-quarter performance will likely reflect the unfavorable impact of higher maintenance downtime in the Corrugated Packaging and the Consumer Packaging segment. Also, reduction in domestic linerboard prices might have offset volume growth across these segments. The Zacks Consensus Estimate for the Consumer Packaging segment’s revenues is pegged at $1,673 million for the quarter, indicating a rise of 0.3% from the year-ago quarter. The Consumer Packaging segment’s adjusted EBITDA is anticipated to be up 0.4% year over year to $227 million.

For the Corrugated Packaging segment revenues, the Zacks Consensus Estimate is pegged at $2,879 million, calling for a 3.7% fall, year on year. The segment’s adjusted EBITDA is likely to be down 13.6% to $478 million.

The folding carton markets remain challenged by weak primary demand for processed, frozen, anddry foods. This is in line with the ongoing consumer preference for fresh foods and the shrinking center of the supermarket. Moreover, demand for carbonated drinks continues to remain bleak, particularly in North America. Furthermore, declines in the North American container board and craft-paper index pricing are likely to have hurt the company’s top line in the fiscal second quarter.

WestRock Company Price and EPS Surprise

WestRock Company Price and EPS Surprise

WestRock Company price-eps-surprise | WestRock Company Quote

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for WestRock this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for WestRock is 0.00%.

Zacks Rank: WestRock currently carries a Zacks Rank of 4 (Sell).

Share Price Performance

WestRock’s shares have lost 15.7% over the past year compared with the industry’s decline of 29.6%.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post earnings beat this quarter:

The Scotts Miracle-Gro Company SMG has an Earnings ESP of +1.49% and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wheaton Precious Metals Corp. WPM has an Earnings ESP of +2.58% and carries a Zacks Rank #2, at present.

Domtar Corporation UFS has an Earnings ESP of +39.8% and carries a Zacks Rank #3 currently.

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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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