On Friday, Telsey Advisory Group adjusted its stock price target for Westrock Coffee Co. (NASDAQ: WEST), reducing it to $10 from the previous $14, while maintaining an Outperform rating on the stock. The decision follows Westrock's announcement of weaker than expected third-quarter results for 2024 and a revision of its financial outlook for 2024 and 2025.
The company cited ongoing challenges in its ground coffee and single-serve segments due to a difficult economic environment, which were partially balanced by positive performance in its flavors, extracts, and ingredients division.
Westrock has also postponed the commencement of its can and glass production lines in Conway, Arkansas, to 2025 due to a delay in the onboarding process of a significant customer. The start of the large can production line is now anticipated in late first quarter of 2025, with another can line expected to begin in the third quarter of 2025, and a glass line starting between the third quarter of 2025 and the first quarter of 2026.
This delay, along with the tough market conditions, has led to a downward revision of the company's adjusted EBITDA guidance for 2024 to $50 million, which includes $10 million in scale-up costs related to the Conway facility. This figure is a decrease from the previously projected range of $60 million to $65 million.
For 2025, Westrock has adjusted its EBITDA forecast to a range of $80 million to $100 million, incorporating $10 million to $15 million in scale-up expenses at the Conway site. This is a significant reduction from the prior estimate of $115 million.
Despite these setbacks, Westrock is looking to counterbalance the adverse impacts by securing new retail coffee clients, increasing single-serve volumes, restructuring costs, and scaling up the Conway production.
Telsey's analyst remarked that while the softer trends are disappointing, they recognize that acquiring new customers can take longer than expected and may introduce volatility into the business. The firm's continued confidence in Westrock's stock is based on the anticipated growth in sales and EBITDA once the Conway, Arkansas facility becomes operational.
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