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Why Is Westlake (WLK) Up 10.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Westlake Chemical (WLK - Free Report) . Shares have added about 10.9% 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 its most recent earnings report in order to get a better handle on the important drivers.

Westlake Chemical’s Q3 Earnings and Sales Beat Estimates

Westlake Chemical posted earnings of 45 cents per share in the third quarter of 2020, down from earnings of $1.22 per share in the year-ago quarter. Barring one-time items, adjusted earnings came in at 60 cents per share that beat the Zacks Consensus Estimate of 46 cents.

Sales fell 8.1% year over year to $1,898 million. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $1,787.9 million.

Segment Highlights

Sales in the Olefins segment fell 17.6% year over year to $369 million in the reported quarter. Operating income in the segment declined 44.6% to $51 million. The downside was mainly due to the impact of Hurricane Laura and higher feedstock costs.

The Vinyls segment generated sales of $1,529 million, down 5.5% year over year. Operating income in the segment was $42 million, down 72.5% year over year.  Impacts of the Hurricane Laura and restructuring costs related to European vinyls business affected margins of the segment.

Financial Position

Westlake Chemical ended the third quarter with cash and cash equivalents of $1,217 million, down 15.3% year over year. Long-term debt was $3,681 million, up 7.5% year over year.

Cash flow from operations was $448 million in the quarter, up 40% year over year.

Outlook

Westlake Chemical stated that it is well-positioned to serve the needs of its customers and maintain a solid financial position. Additionally, strong fundamentals of its business are expected to enable the company to deliver long-term value to the shareholders.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 11.4% due to these changes.

VGM Scores

Currently, Westlake has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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