Stock Analysis

Results: WestRock Company Exceeded Expectations And The Consensus Has Updated Its Estimates

  •  Updated
NYSE:WRK
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It's been a good week for WestRock Company (NYSE:WRK) shareholders, because the company has just released its latest quarterly results, and the shares gained 3.2% to US$42.72. WestRock reported US$4.4b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.57 beat expectations, being 10.0% higher than what the analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for WestRock

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NYSE:WRK Earnings and Revenue Growth February 9th 2021

Taking into account the latest results, the consensus forecast from WestRock's 14 analysts is for revenues of US$18.2b in 2021, which would reflect a credible 3.7% improvement in sales compared to the last 12 months. Earnings are expected to improve, with WestRock forecast to report a statutory profit of US$3.43 per share. In the lead-up to this report, the analysts had been modelling revenues of US$18.2b and earnings per share (EPS) of US$3.36 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

There were no changes to revenue or earnings estimates or the price target of US$51.93, suggesting that the company has met expectations in its recent result. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values WestRock at US$65.00 per share, while the most bearish prices it at US$35.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that WestRock's revenue growth is expected to slow, with forecast 3.7% increase next year well below the historical 7.2%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.9% next year. Factoring in the forecast slowdown in growth, it looks like WestRock is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$51.93, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple WestRock analysts - going out to 2025, and you can see them free on our platform here.

Plus, you should also learn about the 3 warning signs we've spotted with WestRock (including 1 which is concerning) .

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What are the risks and opportunities for WestRock?

WestRock Company, together with its subsidiaries, provides fiber-based paper and packaging solutions in North America, South America, Europe, Asia, and Australia.

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Rewards

  • Trading at 57.7% below our estimate of its fair value

  • Earnings are forecast to grow 12.59% per year

Risks

  • Significant insider selling over the past 3 months

  • Large one-off items impacting financial results

  • Has a high level of debt

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