WestRock Earnings: Sequential Volume Improvements Provide Optimism Despite Near-Term Headwinds

No-moat-rated WestRock reported fiscal fourth-quarter results that came with few surprises. Net sales in the fourth quarter fell almost 8% year over year as volumes remained pressured across much of WestRock’s network. Inventory destocking and a shift from goods to services constrained global demand for packaging despite recent signs of improvement. That said, the company’s operational overhaul continues to bear fruit, with WestRock exiting the year with run-rate cost savings over $450 million, which exceeded management's initial target. Management also announced it is targeting an additional $300 million to $400 million of cost savings in fiscal 2024, which appears to be even more achievable now and we expect will greatly benefit Smurfit WestRock’s North American operations once the merger closes. We maintain our $55 fair value estimate.