We have reaffirmed our Neutral recommendation on leading
). While Methanex should gain from capacity expansion and its
Geismar methanol project, we remain on the sidelines given its
exposure to natural gas curtailment issues.
Methanex, on Jul 24, reported mixed second-quarter 2013
results with earnings missing the Zacks Consensus Estimate while
revenues beating the same. Higher methanol pricing boosted
revenues and profit in the quarter. However, restricted supply of
natural gas affected its operations in Chile, Trinidad and Egypt
in the quarter. Methanex expects the methanol industry and
methanol pricing environment to be stable in the short term.
Methanex, which carries a short-term Zacks Rank #3 (Hold), is
the world's largest supplier of methanol. We feel that the
company may continue to face gas supply restrictions in the near
Methanex's production has been crippled by shortage of natural
gas supplies in various regions. It expects short-term natural
gas curtailment issues across a number of operations. The gas
supply outlook in Chile is more challenging.
Nevertheless, the methanol industry and its pricing
environment appear attractive in the longer term as global demand
is expected to surpass new capacity additions. Despite the global
economic weakness, demand for methanol remains healthy driven by
energy-related applications in Asia, particularly in
Methanex has also taken up a number of steps to boost
capacity. The company is progressing well with the relocation of
the first Chilean plant to Geismar, LA, and is also relocating
the second Chile plant (expected to come online by 2016). The
Geismar project is expected to create significant value for its
Other Stocks to Consider
Other chemical companies having favorable Zacks Ranks include
Akzo Nobel NV
Eastman Chemical Co.
). All of them hold a Zacks Rank #2 (Buy).
AKZO NOBEL NV (AKZOY): Get Free Report
EASTMAN CHEM CO (EMN): Free Stock Analysis
FERRO CORP (FOE): Free Stock Analysis Report
METHANEX CORP (MEOH): Free Stock Analysis
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