The company's track record of execution and productivity improvements, as well as its balanced capital allocation plans implies that investors could be looking at healthy returns upwards of 15% in 2017.
WestRock is one of the leading players in the paper and packaging segment. Its broad portfolio of product offerings and services include corrugated containers, folding cartons, paperboard, dispensing services, and recycling.
Add to that the company's wide geographic reach, and we have a roadmap for stellar share price gains.
However, this period has also marked a time of consolidation in the corrugated packaging industry. That segment accounted for 55% of WestRock's sales in fiscal 2016 and the consolidation coincided with a decline in the company's operating margins.
With BAML's Corrugated Box Converter Survey showing positive pricing trends over the next twelve months WestRock's margins are likely to improve. The pricing outlook for the next 12 months looks stable and another price hike is imminent, possibly as early as the second quarter of 2017.
This combination has the potential to propel margin expansion and develop operating synergies. Over the past few months, WestRock has also made lean its business model by selling its home, health and beauty businesses toSilgan Holdings (SLGN) - Get Report . The M&A moves align WestRock's portfolio and resources around the core paper and packaging solutions businesses.
Beyond aligning its portfolio, WestRock is also trying to cut flab and push productivity to the next level. These maneuvers can lift margins as well. The company has demonstrated rock-solid execution in synergy and productivity improvements.
Over the next 5 years, WestRock has a good earnings outlook. Analysts project 9% earnings per share (EPS) growth annually. This clip is almost in-line with the larger International Paper, and is slightly ahead of Packaging Corp of America and industrial packager Greif (GEF) - Get Report .
Given that shares haven't really moved much this year so far, a nice upside is on the horizon. The dozen analysts offering 12-month price forecasts for WestRock have a median target of $59, translating to a nearly 16% upside from current levels.
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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.