Shares of WestRock Company WRK touched a new 52-week low of $43.90 on Dec 14, before closing trade higher at $44.15. Year-to-date, shares of the company have lost 19.6% of their value.
What Led to the Drop?
WestRock’s share price has been witnessing a downward trend since it reported disappointing fourth-quarter fiscal 2015 (ended Sep 30, 2015) results on Nov 5. The company’s sales and income in the fiscal fourth quarter were negatively impacted by unfavorable foreign currency translation. In addition, merger-related depreciation, depletion and increase in amortization expenses had an adverse impact on income. The company expects the charges to continue to affect its performance in the future.
Notably, WestRock’s largest foreign currency exposure is to the euro and the Brazilian real. As the dollar has strengthened against these currencies, the company estimates this to have a negative impact on its earnings before taxes on an annual basis.
In the Merchandising Displays business of the Consumer Packaging segment, industry demand for promotional displays remains weak owing to a number of factors, including the shift of a major retailer to clean floor policy. The company is working to match its cost structure to its anticipated levels of business through certain actions, one of which is streamlining its operations. WestRock has also announced the closure of its facilities in Tullahoma, TN; Chattanooga, TN; and Lima, OH.
WestRock operates in the highly cyclical pulp, containerboard and paperboard products industries. Moreover, unexpected fluctuations in prices of or demand for the company’s products can put pressure on profit margins, lower sales volume, and pose risk to the company’s estimates.
These bearish factors have also triggered a downward tendency in the company’s estimates in the past 30 days. In fact, the Zacks Consensus Estimate for fiscal 2016 decreased nearly 1% to $3.58 per share and for fiscal 2017 the same reduced 2% to $4.28 per share.
WestRock carries a Zacks Rank #5 (Strong Sell).
Stocks That Warrant a Look
Some better-ranked stocks in the sector include Sappi Ltd. SPPJY, Stora Enso Oyj SEOAY and Svenska Cellulosa Aktiebolaget SCA SVCBY. All of these stocks carry a Zacks Rank #2 (Buy).
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