Packaging firm Smurfit Westrock surprised investors with its earnings miss, sending shares down more than 8% Wednesday and wiping out nearly all the stock's gains for the year.
By late afternoon, the stock had pulled back from its worst lows, trading at $39.46, for a drop of 7.2%.
For the third quarter ending in September, the Dublin-based maker of containerboard and other packaging products posted earnings of 45 cents a share, well below the 60-cent estimate among analysts polled by FactSet. Revenue also came in light at $8.16 billion, below estimates of $8.29 billion.
Looking ahead, the firm is estimating adjusted earnings before interest, taxes, depreciation, and amortization to come in at $4.7 billion for the full year, also below estimates of $4.9 billion. "This primarily reflects the unprecedented cost inflation we continue to experience across the business," CEO Anthony Smurfit said in the earnings call.
The biggest culprits for the miss were the "spiraling costs of energy" as well as freight, CEO Smurfit said during the call. Energy and freight alone are expected to generate $700 million in "unexpected costs" for the full fiscal year ending in December.
To put a fine point on the impact of higher fuel costs, every dollar increase in the price per gallon of diesel fuel directly increases the company's costs by $80 million, Smurfit's Chief Financial Officer Ken Bowles said. (For reference, the wholesale price of diesel in the U.S. has risen nearly $2 to $4.70 a gallon since the Iran war started.)
The paper company, whose market value is around $22 billion, has a slightly rosier outlook for 2027. "As we move into 2027, we believe the actions we've taken during the year will more than offset these costs," CEO Smurfit said on the call.
Analysts seem broadly optimistic about the stock as well, with 14 of the 18 polled by FactSet rating it a Buy.
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