On Jul 4, we downgraded our recommendation on leading methanol
) to Neutral. While Methanex is poised to gain from capacity
expansion and its Geismar methanol project, its exposure to
natural gas curtailment issues leads us to tread with
Why the Downgrade?
Methanex, on Apr 24, reported lower-than-expected
first-quarter 2013 results with both revenues and earnings
missing Zacks Consensus. Estimates. Profit, however, more than
doubled year-over-year, helped by lower costs and higher
Methanex benefited from growing demand for methanol in the
energy industry. However, restricted supply of natural gas
affected its operations in Chile, Trinidad and Egypt in the
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 and Methanex's
decision to idle its Chile operations remains in place due to the
lack of natural gas feedstock.
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 recently announced
the relocation of the second Chile plant. The Geismar project is
expected to create significant value for its
Other Stocks to Consider
Other companies in the chemical space that are worth
Cytec Industries Inc.
). All of them retain a Zacks Rank #2 (Buy).
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METHANEX CORP (MEOH): Free Stock Analysis
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