Westlake Chemical (WLK) Earnings & Sales Top Estimates in Q3

Westlake Chemical Corporation WLK recorded a profit of $308 million or $2.35 a share for third-quarter 2018, up from $211 million or $1.61 earned a year ago. Earnings beat the Zacks Consensus Estimate of $2.24.

Third-quarter net income increased on higher sales prices for caustic soda, increased sales volume of caustic soda, PVC (polyvinyl chloride) resin and polyethylene, lower purchased ethylene cost, benefits from U.S. corporate tax rate cuts and repayment of debt.

Westlake Chemical posted third-quarter revenues of $2,255 million, up 6.9% year over year. It beat the Zacks Consensus Estimate of $2,235 million.

Sales in the quarter benefited from higher sales prices for caustic soda and increased sales volumes for caustic soda, PVC resin and polyethylene.

Westlake Chemical Corporation Price, Consensus and EPS Surprise

 

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

Segment Highlights

Sales at the Olefins segment increased 7.8% year over year to $541 million in the quarter. Operating income at the segment fell 2.4% year over year to $162 million due to lower margin from increased feedstock costs, partly offset by higher sales volumes for polyethylene and higher styrene sales prices compared to last year.
 
The Vinyls segment recorded sales of $1,714 million, up 6.7% year over year. Operating income at the segment was $251 million, up 17.2% year over year. The upside was driven by higher sales prices and volumes for caustic soda, higher sales volumes for PVC resin and reduced purchased ethylene costs.
 
Financial Position

Westlake Chemical ended the quarter with cash and cash equivalents of $788 million, up 16.2% year over year. Total long-term debt was $2,667 million at the end of the quarter, down 20.3% year over year.

Cash flow from operations was around $606 million in the quarter, up around 25.7% year over year.

Outlook

The company noted strong global demand for products across its Olefins and Vinyls segments. Westlake Chemical also expects its investments initiatives to allow it to achieve cash flow and earnings growth.

On Sep 25, 2018, Westlake Chemical announced the acquisition of NAKAN, which is expected to close by early 2019. The buyout will enable Westlake Chemical to expand its product portfolio and global footprint that the company expects to leverage with its existing operations and drive shareholders value.
 
Price Performance

Shares of Westlake Chemical have lost 14.8% in a year’s time, outperforming the 15.6% fall of its industry.

Zacks Rank & Stocks to Consider

Westlake Chemical currently has a Zacks Rank #4 (Sell).

A few better-ranked stocks in the basic materials space are CF Industries Holdings, Inc. CF, KMG Chemicals, Inc. KMG and The Mosaic Company MOS.

CF Industries has an expected long-term earnings growth rate of 6% and a Zacks Rank #1 (Strong Buy). The company’s shares have gained 44.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

KMG Chemicals has an expected long-term earnings growth rate of 28.5% and a Zacks Rank #2 (Buy). Its shares have risen 45.4% in a year’s time.

Mosaic has an expected long-term earnings growth rate of 7% and a Zacks Rank #2. The company’s shares have rallied 62.7% in the past year.

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