Methanex (MEOH) Up 29% in 6 Months: What's Behind the Rally?

Shares of Methanex CorporationMEOH have rallied around 29% over the past six months, outperforming the industry 's decline of roughly 5%.

Methanex has a market cap of roughly $5.2 billion and average volume of shares traded in the last three months is around 740.2K. The company has expected long-term earnings per share growth of 15%, above the industry average of 9.7%.

Let's take a look into the factors that are driving this Zacks Rank #2 (Buy) stock.

What's Driving MEOH?

Forecast-topping earnings performance in the last reported quarter and strong demand fundamentals for methanol have contributed to the rally in Methanex's shares.

Methanex's net profit (attributable to shareholders) increased nearly three-folds year over year in the fourth quarter. Adjusted earnings of $1.70 per share also trounced the Zacks Consensus Estimate of $1.19. Notably, the company surpassed the Zacks Consensus Estimate in three of the trailing four quarters with an average positive surprise of 9.1%.

Methanex is poised to gain from healthy demand fundamentals for methanol, which has been driven by both traditional derivatives and energy-related applications in Asia, particularly in China.

Moreover, higher m ethanol prices should also boost its margins. Last year, the company's average realized prices for methanol jumped roughly 39% year over year, while the same rose 26% in the fourth quarter. Methanex noted that methanol prices improved in the fourth quarter and into the early 2018, supported by methanol supply challenges and healthy demand. Sequentially, the company expects higher average methanol prices in first-quarter 2018.

Meanwhile, the company's Chile IV plant is progressing with its restart process and is expected to be complete by third-quarter 2018. The company expects production from its Chile operations to be higher year-over-year in 2018.

Methanex is also committed to boost shareholder returns by leveraging its solid liquidity position. The company returned $388 million in cash to shareholders in the form of dividend and share repurchases last year.

The company, earlier this year, also announced a 10% hike in its quarterly dividend to 33 cents per share. Methanex's board, last month, also approved a new share repurchase program authorizing it to buyback up to 6,590,095 common shares.

Methanex Corporation Price and Consensus

Methanex Corporation Price and Consensus | Methanex Corporation Quote

Other Stocks to Consider

Other top-ranked companies in the basic materials space include Kronos Worldwide, Inc. KRO , LyondellBasell Industries N.V. LYB and Eastman Chemical Company EMN .

Kronos sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 5%. Its shares have rallied roughly 39% over a year. You can see the complete list of today's Zacks #1 Rank stocks here .

LyondellBasell carries a Zacks Rank #1 and has an expected long-term earnings growth rate of 9%. Its shares have gained around 18% over a year.

Eastman Chemical has an expected long-term earnings growth rate of 8.9% and carries a Zacks Rank #2. Its shares have gained around 31% over a year.

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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.

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

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