With such initiatives, it shows how the management is aligning this company for sustainable future growth, which is very promising. To evaluate the impact of these growth plans, let me refer you to the MRQ and see how the restructuring initiatives are paying off. Firstly, in Q1 2024, the company achieved cost savings of about $200 million, and they expect to exceed their 2024 estimates of $300 million to $400 million.
In addition, it has diversified its end market as well as its geographical reach, which I believe will be a major catalyst to its future growth. Based on relative valuation metrics, WRK appears to be trading at around its fair value with a very minimal margin of safety. The company has a trailing non GAAP PE ratio of 16.45 which is 3.98% above the sector median of 15.82%. This shows that the stock is slightly overvalued and that it is trading around its fair value. Further, seeking Alpha awards a general valuation grade of C+ which is also a fair grade and warrants a hold decision.
Final Trades: SPY, GLD, WRK and SLV
In a nutshell, WRK’s upward trajectory has lost steam and the stock has entered a neutrality phase where a hold decision is the dominant strategy in my opinion. Firstly, the MACD is almost at the same level as the signal line and flattening, a double confirmation of the neutrality of this stock. In addition, the RSI is at 63.4 and flattening, this means that the stock is neither overbought nor oversold but the flattening aspect points out to lack of momentum, hence a confirmation that this stock is in a neutral outlook at the moment. Based on technical indicators, WRK’s upward trajectory appears to have weakened, and the stock has entered a neutral outlook. To begin with, its price rate of change is dipping towards the zero mark, a sign that the upward trend has lost momentum and is weakening.
In my model, I assumed a discount rate of 10% which is the company’s WACC according to by computation. Further, I adopted a growth rate of 2.42%, which is the sector median growth rate for FCF YoY. Using these assumptions and taking the trailing FCF/ share of $2.85 as my base, below is my model output. Although this is a good dividend stock, the company is currently faced with headwinds that are impacting its financial performance. For this reason, if the financial situation doesn’t improve, this could affect its dividends and, in the worst-case scenario, lead to a dividend cut.
The business is profitable, investing in the future, and pays a healthy annual dividend yielding 5%. These two industry leaders pay handsome dividends and aren’t getting enough respect from the market, which puts them in play for income investors and value investors alike. In addition, the company is looking to apply sustainable design principles to all of its product design work, increasing its purchases of virgin fibre from lands certified to credible forest management standards by 25% by 2025. WestRock’s current CEO is Steven Voorhees, who has been at the top of the Atlanta-based firm since it was founded. The company has a 4-year average dividend yield of 3.01% which is 41.08% higher than the sector median.
By 2025, the firm wants to increase the energy efficiency of purchased fuels by 10% per tonne of production from a 2015 baseline, and reduce its CO2e emissions by 20% per tonne of production – based upon the same baseline. In addition to this, the firm can collect or accept materials for recycling, it then processes and recycles the fibre, which can then be put into manufacturing processes with half of it going to its own mills. As https://www.topforexnews.org/ part of these three areas, all of its products made with virgin fibre begin with wood sourced from responsibly-managed forests, with the company actively promoting efforts to increase the amount of land certified to recognise forest management standards. The new firm, which had a combined equity value of $16bn when the transaction went through, was given the name WestRock in May 2015, with the merger completed two months later.
Following this valuation, WRK has a very minimal margin of safety or rather upside potential, and therefore I hold the decision is ideal in this current valuation. WestRock Company, together with its subsidiaries, provides fiber-based paper and packaging solutions in North America, South America, Europe, Asia, and Australia. Packaging company WestRock’s (WRK) shares soared by almost 7% in pre-market trading on Tuesday after a merger announcement with Dublin-based Smurfit Kappa to create the world’s largest listed paper an… Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.
Further, in the same quarter, the company’s corrugated packaging segment sales grew by 3.5% which was primarily driven by the Mexico acquisition. This shows that the company’s growth initiatives and viable, and therefore it is reasonable enough to be optimistic about the future. However, it’s worth noting that the full potential of these initiatives will be realized in the long https://www.investorynews.com/ run and therefore the current financial status could take time before fully improving. To conclude, I would like to reiterate my hold rating because the technical point out to a neutral stock outlook and the company is currently realigning for sustainable long-term growth. From a valuation perspective, the stock has a minimal upside potential warranting a hold decision.
SPPJY vs. WRK: Which Stock Is the Better Value Option?
The Distribution segment distributes corrugated packaging materials and other specialty packaging products, including stretch films, void fills, carton sealing tapes, and other specialty tapes; and provides contract packing services. The Global Paper segment manufactures containerboard, paperboard, and specialty grades primarily to corrugated packaging, folding carton, food service, liquid packaging, https://www.day-trading.info/ tobacco, and commercial print markets. Given this background, it is apparent that WRK’s financial performance has weakened due to the challenges the company is facing. To assess how persistent this performance would be, I refer to seeking Alpha’s 2024 estimates where they projected an EPS of $2.09, marking a YoY slump of 30.72% and revenue of $19.68% representing a YoY decline of about 3.09%.
However, the long-term outlook is bright given the company’s restructuring plans which I believe will not only improve their efficiency hence margin expansion, but also improve their revenue growth due to its expansion in high-growth markets. Following the company’s Q performance, it was apparent that WRK is struggling with some headwinds that are hurting its financials. To begin with, revenue came in at $4.62 billion, marking a YoY decline of about 6.2%, and missing estimates by about $200 million. This was primarily due to lower revenue in the global paper and consumer packaging segment, which reflects the impact of prior mills closure and interior partition divestitures. It was also fuelled by the impact of the economic challenges, with consumer packaging sales being $1.06 billion, down 13%YoY as a result of the adverse economic climate.
- To conclude, I would like to reiterate my hold rating because the technical point out to a neutral stock outlook and the company is currently realigning for sustainable long-term growth.
- Founded in 2015, US-based corrugated packaging company WestRock is one of the biggest businesses in the industry.
- Due to the fact that manufacturing businesses were designated as essential by multiple government organisations, the company was and has been delivering critical infrastructure, supply chains and other manufacturers during this time.
- Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
- The new firm, which had a combined equity value of $16bn when the transaction went through, was given the name WestRock in May 2015, with the merger completed two months later.
- The Global Paper segment manufactures containerboard, paperboard, and specialty grades primarily to corrugated packaging, folding carton, food service, liquid packaging, tobacco, and commercial print markets.
However, the company is projected to have a solid performance from 2025 and beyond, something I believe will be fuelled by its growth initiatives, especially its restructuring strategy. Despite this optimism, I believe it’s prudent to hold investing here until the current financial performance improves, and the restructuring plans pay off fully. The Corrugated Packaging segment produces containerboards, corrugated sheets, corrugated packaging, and preprinted linerboards to consumer and industrial products manufacturers, and corrugated box manufacturers. Following this projected growth, WRK is positioning itself strategically to leverage this solid market trend. The acquisition entails 4 paper mills, 9 corrugated packaging plants, and 6 high graphic plants. The deal has come with several benefits, such as solidifying the company’s presence and position in the growing Latin America containerboard corrugated packaging markets.
WestRock and Smurfit in talks over a potential merger
At the start of the pandemic, the firm limited access to all of its locations to individuals who were absolutely necessary to keep its operations running. In March, WestRock chief commercial officer Jeff Chalovich released a statement that focused on the firm’s responses and actions during the Covid-19 pandemic. WestRock came into existence in a “definitive combination agreement” between packaging companies Rock-Tenn Company and the MeadWestvaco corporation at the start of 2015. NS Packaging looks at the history of the company, how it’s improving its sustainability credentials and the work it’s doing during the pandemic. And, according to its 2019 annual report, the firm recorded net sales of $18.2bn, a 15% growth from the $16.2bn it earned in 2018. As of September 2018, the business had approximately 45,100 employees spread across more than 320 factories, design centres, research labs and sales offices around the world.
The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. Due to the fact that manufacturing businesses were designated as essential by multiple government organisations, the company was and has been delivering critical infrastructure, supply chains and other manufacturers during this time. According to my model output, I estimate a fair value of $45.60 which translates to a 4% margin of safety which is very minimal. My fair price estimation is within range with 8 Wall Street analysts consensus who have an average price target of $45.16. In terms of dividend growth, despite the impact of Covid-19, which halted the company’s consistent dividend growth, it has embarked on an impressive dividend growth since 2021.
Further, its trailing and forward yields of 2.63% and 2.76% are 20.16% and 31.27% above the sector median, positioning this company as a decent dividend payer relative to its sector peers. The paper engineering leader announced a range of steps to preserve its financial position and prioritize debt reduction. The companies will form Smurfit WestRock — set to be one of the largest packaging companies in the world. And, due to the changing nature of the pandemic, the firm has been in daily contact with its suppliers and carriers to monitor any developments that would impact the sourcing of raw materials or delivering orders.
Stock Details
Therefore, I recommend patience before investing here until the current financial performance improves. Founded in 2015, US-based corrugated packaging company WestRock is one of the biggest businesses in the industry. In addition, the company has embarked on investing in high-growth segments such as corrugated containers. According to Precedence Research, the global corrugated packaging industry is projected to grow 1.4x between 2023 and 2032 from $285.94 billion to $410.50 billion. WRK has a 3-year dividend CAGR of 13.02%, which is higher than the sector median of 10.06% and a 1-year dividend growth rate of 10% which is way above the sector median of 3.23%. This implies that besides the company offering a decent yield relative to its peers; it has also grown its dividend better than the sector medians, hence making this a good dividend stock in this sector.
Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. These two companies generate plenty of cash flow to sustain — and grow — their dividend payouts for years to come. WestRock, Smurfit Kappa are in talks to create a company with combined value of roughly $20 billion. Tony Smurfit, CEO of packaging giant Smurfit Kappa, discusses the company’s announcement that they will merge with U.S. peer Westrock. According to 9 analysts, the average rating for WRK stock is “Buy.” The 12-month stock price forecast is $40.86, which is a decrease of -7.65% from the latest price.