WestRock Earnings: Investors Shouldn't Feel Boxed in by Near-Term Headwinds; Shares Undervalued

No-moat rated WestRock’s fiscal third-quarter results came with few surprises and were largely in line with our expectations. Volumes remained pressured during the quarter as the packaging industry continued to toil with persistent inventory destocking across much of the supply chain. Despite improvements in selling prices during the quarter, net sales declined roughly 7% year over year while the firm’s adjusted EBITDA margin fell 250 basis points. While WestRock faces near-term challenges, we think the company is well positioned to capitalize on sequential improvements in demand and its improving cost structure should provide a runway for margin expansion. As such, we maintain our $55 fair value estimate.