Westlake Chemical Hits New 52-Week High - Analyst Blog

By Zacks Equity Research,

Shutterstock photo

Shares of Westlake Chemical Corp . ( WLK ) reached a new 52-week high of $85.94 on Jul 3 to close the trading session a notch lower at $85.66.

The specialty chemicals company has a market cap of roughly $11.4 billion and has seen its shares shot up around 76% over the past one year. Its year-to-date return is 40.8%, much higher than the S&P 500's total return of 8.5%. Average volume of shares traded over the last three months is 675.6K. The company's long-term projected EPS growth is 5%.

What's Driving WLK Up?

Westlake's first-quarter 2014 earnings were $1.18 per share, up from 92 cents per share in the year-ago quarter, topping the Zacks Consensus Estimate of $1.13 per share. The company reported a profit of $158 million in the first quarter, increasing roughly 28% from $123.3 million recorded in the prior-year quarter.

Revenues in the reported quarter were $1,027.7 million, increasing roughly 19% year over year from $864.6 million a year ago and beating the Zacks Consensus Estimate of $964 million.

Westlake posted strong first-quarter results on higher olefins volumes and improved integrated product margins in the quarter, as higher selling prices more than offset the rise in feedstock and energy costs over the prior year. Moreover, the company saw higher sales volumes for polyethylene and ethylene, higher selling prices for key products and contributions from its specialty PVC pipe business (acquired in May 2013) in the quarter.

Although the company reported solid income from the Olefins segment, Westlake reported an operating loss in the Vinyls segment during the quarter.

Westlake in May 2014, agreed to buy Ismaning, Germany-based Vinnolit Holdings GmbH and its subsidiaries from private equity firm Advent International for €490 million (roughly $667 million). Vinnolit is a leading producer of specialty polyvinyl chloride (PVC) resins.

Vinnolit owns a world class R&D facility in Gendorf and applications laboratory in Burghausen and its products are used across a vast spectrum of industrial and building product applications including automotive sealants, cable sheathing, flooring, medical applications, pipes, rigid film and technical coatings.

This acquisition is a strategic fit for Westlake and is expected to broaden its global chlorvinyl footprint. It will add key specialty PVC products and technology to the company's portfolio. Westlake also acquired CertainTeed Corporation's Pipe and Foundation Group (PFG) for about $175 million in cash on May 1.

These acquisitions combined with the company's strong financial position are expected to drive growth in the coming quarters. The wide product horizon of the company along with its cost saving measures and innovations positions it well for solid gains in the future.

Westlake currently holds a Zacks Rank #2 (Buy).

Other stocks to consider in the chemical-plastics space with a favorable Zacks Rank are Kuraray Co. Ltd. ( KURRY ), PolyOne Corp. ( POL ) and A. Schulman, Inc. ( SHLM ). All of these stocks carry a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WESTLAKE CHEM (WLK): Free Stock Analysis Report

POLYONE CORP (POL): Free Stock Analysis Report

SCHULMAN(A) INC (SHLM): Free Stock Analysis Report

KURARAY CO U-AD (KURRY): Get Free Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: PFG , WLK , POL , A , SHLM

More from Zacks.com




Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com