Westlake Reaches 52-Week High - Analyst Blog

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Shares of Westlake Chemical ( WLK ) hit a new 52-week high of $122.74 on Jan 10 and eventually closed at $121.69. The shares of this specialty chemicals company have been on the rise since it reported solid third-quarter 2013 earnings on Nov 7.

The company's long-term estimated earnings per share (EPS) growth rate is 6%. Average volume of shares traded over the last three months was roughly 338.5K.

Growth Drivers

Westlake posted strong third-quarter 2013 results on healthy gains from higher pricing and lower feedstock costs, stemming from North American shale gas production. The 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.

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 had acquired CertainTeed Corporation's Pipe and Foundation Group (PFG) for about $175 million in cash on May 1. The acquisition is a strategic fit for Westlake, as it enhances the company's North American Pipe and building products portfolio by adding specialty product lines and supporting technology.

Westlake also saw higher olefins and vinyls integrated product margins in the third 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 in the third quarter. The Vinyls segment recorded sales rose around 15% year over year to $324.8 million in the reported quarter.

In Aug 2013, Westlake also announced a 20% hike in its quarterly dividend to $0.225 per share from the previous payout of $0.1875 per share.

Westlake, which currently carries a Zacks Rank #2 (Buy), expects continued cost benefits from North American shale gas production. The company continues to invest to capture this cost advantage.

Other Stocks to Consider

Other companies in the specialty chemical space with favorable Zacks Rank are Chemtura Corp. ( CHMT ), A. Schulman, Inc. ( SHLM ) and PolyOne Corp. ( POL ). While Chemtura carries a Zacks Rank #1 (Strong Buy), A. Schulman and PolyOne hold a Zacks Rank #2 (Buy).

CHEMTURA CORP (CHMT): Free Stock Analysis Report

POLYONE CORP (POL): Free Stock Analysis Report

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

WESTLAKE CHEM (WLK): Free Stock Analysis Report

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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 Symbols: A , CHMT , EPS , PFG , POL

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