Yahoo Finance Earnings Beat: WestRock Company Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
Investors in WestRock Company (NYSE:WRK) had a good week, as its shares rose 3.2% to close at US$42.72 following the release of its first-quarter results. 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. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Check out our latest analysis for WestRock
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 reasonable 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. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The analysts reconfirmed their price target of US$51.93, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on WestRock, with the most bullish analyst valuing it at US$65.00 and the most bearish at US$35.00 per share. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that WestRock's revenue growth will slow down substantially, with revenues next year expected to grow 3.7%, compared to a historical growth rate of 7.2% over the past five years. Compare this to the 25 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 3.9% per year. So it's pretty clear that, while WestRock's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous 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.
With that in mind, we wouldn't be too quick to come to a conclusion on WestRock. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple WestRock analysts - going out to 2025, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for WestRock (1 is potentially serious!) that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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