WestRock (WRK) is a multinational provider of paper and packaging solutions for consumer and industrial markets. The company operates in two main segments: corrugated packaging and consumer packaging, explains Zach Jonson, CFA and Chief Investment Officer at Stack Financial Management.
Corrugated packaging and containers provide solutions to a wide array of customers to protect, ship, store, and display products. The consumer packaging segment broadens outside of the pure corrugated box market and provides other types of solutions such as beverage carriers, express mail envelopes, and premium folding cartons.
WestRock has the #1 or #2 position in numerous paper and packaging markets. This has allowed them to better weather the pandemic downturn and placed them in a position of strength for the corresponding rebound.
Additionally, WRK has been a beneficiary of the shift towards e-commerce and the use of home delivery packaging services. While growth rates in this segment are anticipated to slow after the economy returns to normal, WRK has a diverse end customer base that will see a pick-up in demand as other industries recover.
Sustainable packaging is becoming more important to both customers and investors alike. Since 2018, WRK has increased their annual run rate of sales by $100 million by replacing plastic in a variety of products.
For example, a few years ago many companies like Amazon and Walmart shifted towards plastic-lined envelopes for the shipment of small items.
In response, WestRock created a line of paperboard-based plastic alternatives that utilize more recycled material. This is one of many examples of how WRK’s focus on sustainable and innovative packaging solutions presents them with numerous growth opportunities in the future.
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At Stack Financial Management, we analyze stocks using four key factors: Value, Growth, Quality, and Technical Strength. Utilizing these four components, we create a proprietary score which ranks stocks on a relative basis.
WestRock ranks high due to its attractive value characteristics, forward growth prospects, and recent technical strength. As a beneficiary of the long-term shift towards e-commerce and the use of home delivery packaging services, WestRock is well positioned to provide investors with strong returns as the economy continues to recover over the course of 2021.
Disclosure: It should not be assumed that future performance of any specific investment, including the above, will be profitable, equal any historical performance level, be suitable for your portfolio or individual situation, or prove successful. Clients and individuals associated with Stack Financial Management may hold positions in and may, from time to time, make purchases or sales of this security. Please see full disclosure information on our website (link below).
