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Westlake Earnings Crush Ests, Strikes 52-Week High

WLK IFF NEU GSM

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Shares of Westlake Chemical Corp. (WLK - Snapshot Report) clocked a new 52-week high following the release of its fourth-quarter 2013 numbers that topped expectations.  
 
The Texas-based specialty chemicals company saw its profit for the reported quarter catapult roughly 79% year over year to a record $171 million as it gained from higher pricing for several of its products and lower cost natural-gas based ethylene production stemming from North American natural gas liquids production. Earnings of $2.54 per share topped the Zacks Consensus Estimate by 32 cents and exceeded $1.42 per share earned in the year-ago quarter.
 
For full-year 2013, profit shot up 58% year over year to $610.4 million. Earnings of $9.09 per share outstripped the Zacks Consensus Estimate of $8.80.
 
Westlake’s shares touched a fresh 52-week high of $133.34 last Friday, eclipsing its previous high of $131.98 recorded a day ago. Its shares pulled back to end the trading session at $131.84 on Feb 21. Westlake has seen its shares rise roughly 55% over a year.
 
Revenues rose roughly 19% year over year to around $952 million in the quarter, beating the Zacks Consensus Estimate of $917 million. Westlake benefited from increased sales volumes for many of its products and higher pricing for polyethylene, styrene and PVC resin in the quarter.
 
For the full year, revenues went up around 5% year over year to $3,759.5 million, but fell short of the Zacks Consensus Estimate of $3,812 million. Higher selling prices and contributions from the specialty PVC pipe business (acquired in May 2013) aided the results.
 
Sales from the Olefins segment moved up roughly 20% year over year to $668.1 million in the fourth quarter. Income from operations soared 73% year over year to $247.3 million in the quarter on higher olefins integrated product margins owing to higher polyethylene prices and lower feedstock costs.
 
The Vinyls segment recorded sales of $283.5 million in the reported quarter, a 15% year-over-year rise. Income from operations inched up roughly 2% to $18.6 million on increased volumes for caustic and PVC resin.
 
Westlake ended 2013 with cash and cash equivalents of $461.3 million, down 42% year over year. Long-term debt was $763.9 million, essentially flat year-over-year. Net cash provided by operating activities was $752.7 million in 2013, up 23% year over year. Capital expenditures were $679.2 million for the year.
 
Moving ahead, Westlake expects continued cost benefits from North American shale gas production. The company continues to invest to capture this cost advantage. The commencement of its chlor-alkali facility in Geismar, La., and expansion of its Lake Charles, La., ethylene unit coupled with expansion of ethylene and PVC capacity at its Calvert City, Ky., facility (expected in second-quarter 2014) are expected to boost profitability in the Vinyls segment this year.
 
Westlake is a Zacks Rank #1 (Strong Buy) stock.
 
Other companies in the specialty chemical space with a favorable Zacks Rank are Globe Specialty Metals, Inc. (GSM - Snapshot Report), International Flavors & Fragrances Inc. (IFF - Analyst Report) and NewMarket Corporation (NEU - Snapshot Report), all with a Zacks Rank #2 (Buy).

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