On Dec 22, we issued an updated research report on
WestRock Company
WRK
. The company is gaining from the solid demand for corrugated packaging, containerboard as well as food and beverage consumer packaging in the wake of the coronavirus pandemic. Further, the e-commerce boom and acquisitions will drive growth.
Shares of WestRock have appreciated 67.3% over the past six months, outperforming the
industry
’s growth of 51.2%.
Packaging Demand to Spur Growth
Packaging products are essential for the distribution of food and beverage products. Hence, WestRock’s Consumer Packaging segment is gaining from sustainable paper and packaging options as well as significant demand in food, food service, and beverage packaging categories owing to the pandemic. Notably, this category represents 80% of the segment’s revenues. Further, the company will benefit from the e-commerce boom that will fuel demand for boxes. WestRock’s corrugated packaging business is benefiting from improved box shipment, as well as increased demand from distribution, industrial and agricultural customers as the economy gradually recovers.
Capital Projects to Fuel Growth
WestRock has been witnessing robust demand for containerboard and corrugated packaging in Brazil. It is well poised to bank on this growth in the region, with the ramp-up of the Porto Feliz box plant and the completion of the TresBarras project in the first half of fiscal 2021. The company will also reap the benefits of strategic capital projects in its mill and converting systems in the near term. Once completed, these projects are expected to contribute to the company’s EBITDA.
Acquisitions to Aid Growth
WestRock acquired KapStone Paper and Packaging Corp in 2019, with the integrations on track. The acquisition has helped the company cement its presence in the Western United States. In addition, KapStone’s corrugated packaging operations continue to enhance WestRock’s North American corrugated packaging business and provide complementary products. It is also focused on improving margins of its North American corrugated packaging business. These moves are likely to aid the company. Apart from these, WestRock is focused on reducing debt through its Pandemic Action Plan.
Positive Earnings Estimates
The company’s earnings estimate for fiscal 2021 is currently pegged at $3.24, suggesting year-over-year growth of 17.4%. The consensus mark has moved 29% north over the past 60 days.
Zacks Rank & Other Stocks to Consider
WestRock currently flaunts a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
Some other top-ranked stocks in the basic materials space are
Bunge Limited
BG
,
BHP Group Limited
BHP
and
Rayonier Advanced Materials Inc.
RYAM
. While Bunge and BHP Group sport Zacks Rank #1, Rayonier Advanced Materials carries a Zacks Rank of 2, at present.
Bunge has a projected earnings growth rate of 43% for the current year. The company’s shares have gained around 55.6% in six months’ time.
BHP Group has an expected earnings growth rate of 32.4% for fiscal 2021. Shares of the company have appreciated 33.5% over the past six months.
Rayonier Advanced Materials has an estimated earnings growth rate of 92% for 2020. Over the past six months, the stock has soared nearly 132.3%.
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