A month has gone by since the last earnings report for Westlake (WLK). Shares have added about 10.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Westlake due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.
Westlake’s Q4 Earnings Beat, Sales Miss Amid Weak Volumes and Prices
Westlake reported a loss of $544 million or $4.22 per share for the fourth quarter of 2025. This compares to a profit of $7 million or 6 cents per share in the year-ago quarter.
Barring one-time items, adjusted loss per share came in at 25 cents, narrower than the Zacks Consensus Estimate of a loss of $1.44.
Sales dipped around 10.9% year over year to $2,533 million in the quarter. It missed the Zacks Consensus Estimate of $2,567.4 million. The top line was negatively impacted by lower average sales price and lower sales volume.
The results in the fourth quarter were also hampered by higher feedstock and energy costs. The shutdown of three chlorovinyl production facilities and one styrene facility in North America resulted in noncash accelerated depreciation, amortization, and asset write-off charges. More significant impact from planned turnarounds and unplanned outages in 2025 also impacted full-year results.
Segment Highlights
Sales in the PEM segment went down around 12.4% year over year to $1,632 million in the reported quarter. It lagged our estimate of $1,652 million. Performance and Essential Materials' loss from operations in the fourth quarter of 2025 was $717 million compared with a loss of $41 million in the fourth quarter of 2024 due to lower selling prices of most major products, particularly for chlorine and polyethylene, and reduced sales volume, particularly for PVC resin, polyethylene and epoxy resin. Lower chlorine sales volume and average sales price, and lower caustic soda sales volume also weighed on the segment in 2025.
The HIP segment generated sales of $901 million, down around 8.1% from the year-ago quarter. The figure missed our estimate of $1,008 million. HIP’s income from operations in the fourth quarter of 2025 was $66 million, down $129 million from the fourth quarter of 2024. The year-over-year decline resulted from lower sales volume, especially for global compounds and lower margins.
Financial Position
Operating activities generated $225 million in net cash in the fourth quarter of 2025. Capital expenditures were $241 million. For the quarter, free cash outflow was $16 million. As of Dec. 31, 2025, the company's cash and cash equivalents were roughly $2.7 billion, with a long-term debt of $5.1 billion.
Outlook
Westlake expects its profitability to improve in 2026. The company continues to face challenges from weak global industrial and manufacturing activity. It is pushing its cost-cutting plans to offset these pressures. It is focusing on improving PEM profitability to reach the targeted $600 million in EBITDA improvement, while the HIP segment is expected to benefit from the January 2026 acquisition of ACI.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 18.57% due to these changes.
VGM Scores
At this time, Westlake has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock has a score of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Westlake has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
