A month has gone by since the last earnings report for Westlake Chemical (WLK Quick QuoteWLK - Free Report) . Shares have added about 2.3% 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 Q1 Earnings and Sales Beat Estimates

Westlake Chemical posted profits of $242 million or $1.87 per share in the first quarter of 2021, up from a profit of $145 million or $1.13 per share in the year-ago quarter. Earnings per share topped the Zacks Consensus Estimate of $1.56.

Sales rose around 22% year over year to $2,357 million. The figure also surpassed the Zacks Consensus Estimate of $1,998.2 million.

The company benefited from increased sales prices and margins for most of its key products including polyethylene and PVC resin, and strong demand in downstream building products business in the quarter. These were partly offset by lost production and sales volumes, higher maintenance expense and increased ethane and ethylene feedstock and natural gas fuel costs associated with the winter storm.

Segment Highlights

Sales in the Vinyls segment went up around 21% year over year to $1,820 million in the reported quarter. Operating income in the segment was $200 million, up nearly three-fold year over year.  The results were driven by higher sales prices and margins for PVC resin, and increased earnings in the downstream building products business.

The Olefins segment generated sales of $537 million, up roughly 26% year over year. Operating income in the segment was $180 million, up nearly three-fold year over year. The upside was mainly due to higher sales prices and margins for all products, driven by strong global demand.

Financial Position

Westlake Chemical ended the quarter with cash and cash equivalents of $1,393 million, down 9% year over year. Long-term debt was $3,547 million, down around 20% year over year.

Cash flow from operations was $265 million for the quarter, a roughly four-fold year-over-year increase.

Outlook

Moving ahead, Westlake Chemical sees continued strong global demand in polyethylene, PVC and downstream building products on strong markets for the downstream uses of its products including residential construction, packaging and healthcare. The company remains focused on operating its facilities safely and efficiently. It is also making disciplined investments, launching new products, lowering costs and leveraging its current products and footprint globally.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 22.9% due to these changes.

VGM Scores

At this time, Westlake has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Westlake has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.