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Westlake Chemical Up 89% in a Year: What's Behind the Rally?

Shares of Westlake Chemical CorporationWLK have popped around 89% over a year. The company has also outperformed its industry' s gain of roughly 53% to over the same time frame.

Westlake Chemical, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $14.7 billion. Average volume of shares traded in the last three months is around 813.1K. The company has an expected long-term earnings per share growth of 10.6%, above the industry average of 9.6%.

Let's take a look into the factors that are driving this chemical company.

Driving Factors

Forecast-topping earnings performance in the first three quarters of 2017 and an upbeat outlook have contributed to a rally in Westlake Chemical's shares. The company delivered positive earnings surprise of 57.5%, 1.7% and 18.7% in the first, second and third quarter of 2017, respectively.

Westlake Chemical is gaining from contributions of Axiall acquisition, improved demand and higher selling prices for major products. The company, in its third-quarter call, said that it benefited from increased demand for all major products in both Vinyls and Olefins segments along with higher prices in the Vinyls segment. The company sees increased ethylene availability with the start-up of new ethylene plants and completion of capacity expansions.

The company believes that the Axiall buyout and continued investments to improve the reliability and operational efficiency of its assets will enable it to fully leverage the improving Vinyls market. It also sees continued favorable demand trends for all of its major products.

Westlake Chemical should continue to benefit from the Axiall acquisition. The acquisition has diversified the company's product portfolio and geographical operations, creating a North American leader in Olefins and Vinyls. The company expects to realize around $120 million in synergies and cost savings related to the acquisition for 2017.

Annual estimates for Westlake Chemical have also moved north over the past two months, reflecting analysts' confidence on the stock. Over this period, the Zacks Consensus Estimate for 2017 has increased by around 12% to $5.54 per share. The Zacks Consensus Estimate for 2018 has also moved up roughly 16% over the same timeframe to $7.01.

The Zacks Consensus Estimate for earnings for 2017 reflects an expected year-over-year growth of around 43.2%. Moreover, earnings are expected to register a roughly 26.5% growth in 2018.

Westlake Chemical Corporation Price and Consensus

Westlake Chemical Corporation Price and Consensus | Westlake Chemical Corporation Quote

Stocks to Consider

Companies worth considering in the basic materials space include Huntsman Corporation HUN , Koppers Holdings Inc. KOP and Air Products and Chemicals, Inc. APD . While Huntsman and Koppers sport a Zacks Rank #1 (Strong Buy), Air Products carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Huntsman has an expected long-term earnings growth of 8%. The stock has gained around 71% over a year.

Koppers has an expected long-term earnings growth of 18%. The stock has gained around 20% over a year.

Air Products has an expected long-term earnings growth of 14.1%. Its shares are up roughly 17% 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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