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Here's Why You Should Add Westlake (WLK) to Your Portfolio

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Westlake Chemical Corporation’s (WLK - Free Report) stock looks promising at the moment. The company is benefiting from the global economic rebound, higher sales prices for most of its key products, and demand strength in building and construction materials business.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.

Westlake Chemical currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.

Let’s delve deeper into the factors that make this chemical maker an attractive choice for investors right now.

Price Performance

Shares of Westlake Chemical are up 43.3% over a year compared with 42.5% rise of its industry. It has also outperformed the S&P 500’s roughly 31.2% rise over the same period.

 

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Estimates Northbound

Over the past two months, the Zacks Consensus Estimate for Westlake Chemical for 2021 has increased around 16.8%. The consensus estimate for third-quarter 2021 has also been revised 26.6% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Solid Growth Prospects

The Zacks Consensus Estimate for earnings for 2021 for Westlake Chemical is currently pegged at $12.28, indicating expected year-over-year growth of 436.2%. Moreover, earnings are expected to register 541.7% growth in third-quarter 2021. The company also has an expected long-term earnings per share growth rate of 49.7%, above the industry average of 38.8%.

Positive Earnings Surprise History

Westlake Chemical has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 21.1%, on average.

Growth Drivers in Place

Westlake Chemical should benefit from higher demand in its polyethylene business in specialty applications, especially food packaging, and strength in global demand for polyvinyl chloride (“PVC”) resin. It is seeing strong demand in the downstream building products business on the back of new housing starts and spending on repair and remodeling activities. The company benefited from strong demand for most of its products in the second quarter on continued global economic expansion and is optimistic about the strengthening of the housing, repair and remodeling markets.

Robust demand in North American residential construction and the repair and remodeling markets is also driving prices of PVC resin. Westlake Chemical’s Olefins unit is also benefiting from higher prices of all products on the back of strong global demand.

The company will also gain from its capacity expansion projects and actions to improve operating efficiency and reduce costs. It is also making disciplined investments, developing new products and leveraging its current products and footprint globally.

Westlake Chemical should also benefit from synergies of acquisitions. The company, on its second-quarter call, said that it aims to leverage the growth opportunities arising from acquisitions.  It expects that the recently announced acquisitions of Boral North America and LASCO Fittings, totaling around $2.4 billion, will initiate a stage of development and growth for the company.

Stocks to Consider

Some other top-ranked stocks worth considering in the basic materials space include Nucor Corporation (NUE - Free Report) , ArcelorMittal (MT - Free Report) and AdvanSix Inc. (ASIX - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has a projected earnings growth rate of 489.2% for the current year. The company’s shares have surged around 164% in a year.

ArcelorMittal has an expected earnings growth rate of 1,731.2% for the current year. The company’s shares have shot up around 193% in the past year.

AdvanSix has an expected earnings growth rate of around 160.4% for the current year. The company’s shares have gained roughly 149% in the past year.


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