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Westlake Chemical (WLK) Earnings & Sales Lag Estimates in Q1

Zacks Equity Research

Westlake Chemical Corporation WLK delivered a profit of $72 million or 55 cents per share for first-quarter 2019, down from $287 million or $2.20 it earned in the year-ago quarter. 

Barring one-time items, adjusted earnings per share (EPS) amounted to 94 cents and fell short of the Zacks Consensus Estimate of $1.38. 

Sales declined 5.8% year over year to $2,025 million. Also, the figure missed the Zacks Consensus Estimate of $2,080 million.

Westlake Chemical Corporation Price, Consensus and EPS Surprise

 

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

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Segment Highlights

Sales in the Olefins segment fell 8.7% year over year to $459 million in the quarter. Operating income in the segment plunged roughly 77.3% to $37 million. This was mainly caused by lower margins resulting from reduced sales prices for major products, which followed the sharp drop in global crude oil prices in fourth-quarter 2018. Also, higher olefins production capacity along with increased ethane feedstock costs affected results, partly offset higher polyethylene and styrene sales volumes.

The Vinyls segment generated sales of $1,566 million, down 4.9% year over year. Operating income in the segment was $101 million, down around 62% year over year. The decline was caused by lower sales prices for major products, higher costs related to acquisition, restructuring and integration-related activities along with higher ethane feedstock costs. The downside was partly offset by lower purchased ethylene costs.

Financial Position

Westlake Chemical ended the first quarter with cash and cash equivalents of $445 million, down around 40.9% year over year. Long-term debt was $2,669 million, down from $2,666 million in the year-ago quarter.

Cash flow from operations was $147 million in the quarter, down 34.7% year over year.

Outlook

The company is witnessing good demand for major chemical products in the domestic and export markets. However, it experienced a difficult pricing environment in the first quarter, stemming from sharp decline in global crude oil prices in late 2018 along with softer Chinese demand.

The management is cautiously optimistic that the trade tensions between the United States and China as well as crude oil prices will improve in second-half 2019.

Price Performance

Shares of Westlake Chemical have lost 44.1% in a year’s time compared with the industry’s 39.2% decline.



Zacks Rank & Key Picks

Westlake Chemical currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Sandstorm Gold Ltd SAND, Israel Chemicals Ltd. ICL and AngloGold Ashanti Limited AU, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sandstorm Gold has an expected earnings growth rate of 200% for 2019. The company’s shares have gained 10.9% in the past year.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current year. The company’s shares have appreciated 22% in a year’s time.

AngloGold has an expected earnings growth rate of 86.8% for 2019. Its shares have surged 36.6% in a year’s time.

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