What Does WestRock’s Newly Added Risk Factor Tell Investors?


Atlanta-based WestRock (WRK) is a multinational packaging solutions company. WestRock was recently named to the Dow Jones Sustainability North America Index for the second consecutive year. The inclusion in the index recognizes WestRock’s commitment to sustainable business practices. The company also recently received the Sustainability Award of the Year from the Paperboard Packaging Council for its innovative packaging designs.

With this in mind, let’s look at the company’s recent financial results and understand its newly added risk. (See Insiders’ Hot Stocks on TipRanks)

Q4 Financial Results

WestRock reported revenue of $5.09 billion for the fourth-quarter ended September 30, 2021, which exceeded the consensus estimate of $5.07 billion. The company had posted revenue was $4.47 billion in the same quarter last year. Adjusted earnings of $1.23 per share were above the consensus estimate of $1.20 per share. The company had reported earnings of $0.73 per share in the year-ago period.

During the quarter, WestRock distributed $64 million in dividends and returned $122 million to shareholders through share repurchases. It ended the quarter with $3.7 billion of liquidity, consisting of cash and committed credit facilities. It has $8.2 billion of debt. (See WestRock stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, WRK’s main risk category is Finance & Corporate, which accounts for 36% of the total 25 risks identifies for the stock. The company has recently added a new risk to its profile under the Macro and Political risk category.

WestRock has informed investors that climate change poses various threats to its business. It has cautioned that extreme weather events such as hurricanes, tornados, floods, and wildfires could damage its facilities, which could lead to production loss. Additionally, unpredictable weather patterns may disrupt the supply chain and result in raw material shortages or high raw material costs. Furthermore, the company warns that the transition to low-carbon energy and related regulations may increase its costs and have a material impact on its financial results.

The Finance and Corporate risk factor’s sector average is at 35%, compared to WestRock’s 36%. Shares of the company have gained about 10% year-to-date.

Analysts’ Take

Following WestRock’s fourth-quarter earnings report, Wells Fargo analyst Gabe Hajde reiterated a Buy rating on the stock but lowered the price target to $62 from $65 (upside potential of 28.79%).

Overall, the street has a Moderate Buy consensus rating based on 4 Buys, 3 Holds, and 1 Sell. The average WestRock price target of $54.29 implies 12.78% upside potential to current levels.

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