Methanex's Louisiana Project OK'd

Methanex Corporation (MEOH - Analyst Report) has received the necessary air permits from the State of Louisiana and the Environmental Protection Agency (EPA) to build and operate its one million ton-methanol project in Geismar, Louisiana.

The construction of the site will start soon and the project is expected to be completed in less time and will involve significantly less capital compared with a similar greenfield methanol plant. Methanex expects that the project will also create significant value for shareholders. Methanol production from the Geismar site is expected by the end of 2014.

Last month, Methanex released its third-quarter 2012 results. The company reported adjusted earnings of 38 cents per share in the quarter compared with 43 cents per share registered in the same period last year. The results surpassed the Zacks Consensus Estimate of 30 cents, reflecting a positive surprise of around 26.7%.

Revenues dipped 2.1% year over year to $655.3 million, missing the Zacks Consensus Estimate of $659 million. Sales volumes in the quarter totaled 1,899 million tons, up 0.5% from the year-ago quarter.

Methanex feels that the methanol industry and its pricing environment appear attractive in the longer term as global demand is expected to surpass new capacity additions. The company, however, sees upward pressure on methanol prices in the fourth quarter stemming from steady demand and industry outages. It further noted that methanol price will depend on a number of factors such as economic health, operating rates, global energy prices and demand.

The company believes that its healthy financial position, strong global supply network and competitive-cost position will strengthen its position as the global leader in the methanol industry and enable it to continue to deliver incremental returns to shareholders.

Methanex, which faces stiff competition from Celanese Corp. (CE - Analyst Report) and Eastman Chemical Co. (EMN - Analyst Report), retains a short-term (1 to 3 months) Zacks #3 Rank (Hold). We currently have a long-term (more than 6 months) Underperform recommendation on the stock.