Westlake Gains on Buoyant Q3 Earnings - Analyst Blog

By Zacks Equity Research,

Shutterstock photo

Shares of specialty chemicals company Westlake Chemical ( WLK ) shot up as much as 5% after it reported forecast-topping numbers for the third quarter of 2013.

The Texas-based company's earnings for the quarter climbed to $2.54 per share from $1.30 per share a year-ago, outshining the Zacks Consensus Estimate of $2.21. Profit zoomed roughly 96% year over year to $170.3 million as the company gained from higher pricing and lower feedstock costs stemming from North American shale gas production.

Revenues rose roughly 22% year over year to around $1,004 million in the quarter, beating the Zacks Consensus Estimate of $935 million. Westlake benefited from increased sales volumes for styrene and caustic, higher selling prices and contributions from its specialty PVC pipe business (acquired in May 2013) in the quarter.

Westlake saw higher olefins and vinyls integrated product margins in the quarter, helped by higher selling prices for key products. Increased ethylene production at the company's Lake Charles complex also contributed to olefins margin expansion.

Sales from Westlake's Olefins segment jumped roughly 26% year over year to $679.3 million. Income from operations surged 91% year over year to $237.2 million in the quarter on higher olefins integrated product margins.

The Vinyls segment recorded sales rose around 15% year over year to $324.8 million in the reported quarter. Income from operations surged 64% year over year to $39.6 million, attributable to higher vinyls integrated product margins.

Westlake ended the quarter with cash and cash equivalents of $591.6 million, down 50% year over year. Long-term debt stood at $763.8 million, essentially flat on a year-over-year basis. Net cash provided by operating activities was $547.5 million for the first nine months of 2013, up 11% year over year. Capital expenditures were $498.3 million for the period.

Moving ahead, Westlake expects continued cost benefits from North American shale gas production. The company continues to invest to capture this cost advantage with the planned commencement of its chlor-alkali unit in Geismar, La., before the end of 2013 and expansion of its ethylene and PVC capacity at its Calvert City, Ky., facility in 2014.

Westlake currently retains a Zacks Rank #3 (Hold).

Other companies in the specialty chemical space with favorabe Zacks Rank are Ferro Corp. ( FOE ), HB Fuller Co. ( FUL ) and Globe Specialty Metals, Inc. ( GSM ). All of them retain a Zacks Rank #2 (Buy).

FERRO CORP (FOE): Free Stock Analysis Report

FULLER(HB) CO (FUL): Free Stock Analysis Report

GLOBE SPECIALTY (GSM): Free Stock Analysis Report

WESTLAKE CHEM (WLK): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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 , Earnings , Stocks
Referenced Stocks: FOE , FUL , GSM , WLK

More from Zacks.com




Follow on:

Find a Credit Card

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