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Goldman Sachs Makes Bull Call On WestRock, Sees Cash, Catalysts And Industry Leverage

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In a report published Thursday, Goldman Sachs analyst Alex Ovshey initiated coverage of Westrock Company Common Stock When Issued (NYSE: WRK) with a Buy rating and $73 price target. Westrock was created by the merger between Rock-Tenn Company (NYSE: RKT) and MeadWestvaco Corp. (NYSE: MWV) on July 1, 2015.

The analyst believes that the company has meaningful leverage to the already well consolidated boxboard and containerboard markets, while also having "favorable cash flow profile supported by execution on targeted synergies." The analyst also believes that the stock valuation is attractive, as is the balance sheet optionality.

"We expect WRK will exceed its $300 mn in targeted merger synergies and achieve $400 mn over the next three years, based on historical precedent for similar transactions. Based on this precedent, we also see potential upside to our $400 mn synergies estimate," Ovshey stated.

According to the analyst, Westrock is likely to be able to generate cumulative FCF worth about $15 per share through 2017. On July 1, the company announced a share buyback authorization of 40 million shares and the analyst expects the repurchase of 8 percent of Westrock's shares within the next 12 months. The company also raised its dividend on July 1, while another raise is likely following the spinoff of the Chemicals business by the end of 2015.

Latest Ratings for RKT

May 2015BarclaysMaintainsOverweight
Feb 2015BarclaysMaintainsOverweight
Feb 2015JefferiesMaintainsBuy

View More Analyst Ratings for RKT
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Posted-In: Alex Ovshey Goldman SachsAnalyst Color Initiation Analyst Ratings


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