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Westlake Chemical's (WLK) Q1 Earnings: Is a Beat Likely?

Westlake Chemical CorporationWLK is slated to release first-quarter 2018 results before the market opens on May 3.

In the last reported quarter, the company recorded a net income of $802 million or $6.15 per share, marking an eight-fold rise from $99 million or 76 cents earned a year ago. The bottom line was boosted by a tax benefit of around $591 million. Adjusted earnings for the quarter were $1.62 per share, which missed the Zacks Consensus Estimate of $1.69.

Net sales went up around 15.9% year over year to $2,010 million but the figure missed the Zacks Consensus Estimate of $2,073 million.

Notably, Westlake Chemical surpassed the Zacks Consensus Estimate in three of the trailing four quarters while missing once, with an average positive surprise of 18.4%.

Let's take a look at how things are shaping up for the forthcoming announcement.

Westlake Chemical Corporation Price and EPS Surprise

Westlake Chemical Corporation Price and EPS Surprise | Westlake Chemical Corporation Quote

Earnings Whispers

Our proven model shows that Westlake Chemical is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:

Zacks ESP : Earnings ESP for Westlake Chemical for the first quarter is +1.18%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are currently pegged at $2.12 and $2.09, respectively. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Westlake Chemical currently sports a Zacks Rank #1, which when combined with a positive ESP, makes us reasonably confident of an earnings beat. You can see the complete list of today's Zacks #1 Rank stocks here.

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Westlake Chemical, during fourth-quarter 2017 earnings call, noted that since its Axiall transaction in August 2016, it has made considerable progress in integration and improvement activities and continues to invest to improve operations and create additional value related to the transaction.

Westlake Chemical's revenues for first-quarter 2018 is projected to increase roughly 4.5% from the fourth, as the Zacks Consensus Estimate is currently pegged at $2,101 million.

Sales for the company's Olefins segment for the first quarter is projected to increase 3.1% sequentially, as the Zacks Consensus Estimate is currently pegged at $533 million. The segment witnessed a 9.8% year-over-year increase in sales during the fourth quarter while operating income rose 11.4% on the back of increased integrated margins resulting from higher sales prices and lower costs related to planned turnarounds and unplanned outages, partly offset by increased feedstock and energy costs.

Sales for the Vinyls segment is expected to increase 5.2% sequentially as the Zacks Consensus Estimate is currently pegged at $1,570 million. Net sales for the unit rose more than 18% in the last reported quarter while operating income jumped more than five-fold year over year, aided by higher sales volumes resulting from higher operating rates and increased integrated margins.

Westlake Chemical is gaining from contributions of the Axiall acquisition and higher global demand for all major products in both Vinyls and Olefins segments.

Moreover, Westlake Chemical is likely to continue benefiting from low cost ethane natural gas in the United States, resulting from oil and gas drilling activity driven by higher oil prices . The company is also expected to benefit from a favorable chlor-alkali cycle driven by strong global demand.

Shares of Westlake Chemical have moved up 24.9% in the past six months, outperforming the 14.1% growth recorded by its industry .

Other Stocks Poised to Beat Estimates

Here are some other companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Univar Inc. UNVR has an Earnings ESP of +2.63% and holds a Zacks Rank #2.

FMC Corporation FMC has an Earnings ESP of +0.31% and carries a Zacks Rank #2.

Century Aluminum Company CENX has an Earnings ESP of +29.41% and carries a Zacks Rank #3.

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Westlake Chemical Corporation (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.


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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