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Methanex (MEOH) Up 5.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Methanex (MEOH - Free Report) . Shares have added about 5.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Methanex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Methanex’s Earnings and Revenues Surpass Estimates in Q2

Methanex logged a profit (attributable to shareholders) of $107 million or $1.31 per share in the second quarter of 2021 against a loss of $65 million or 85 cents in the year-ago quarter.

Adjusted earnings per share (barring one-time items) in the reported quarter were $1.24 against a loss of 84 cents in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of $1.05 per share.

Revenues shot up 108.6% year over year to $1,068.3 million in the quarter from $512.3 million a year ago, also surpassing the Zacks Consensus Estimate of $990 million. Strong demand and robust prices led to considerable increases in the top line.

Adjusted EBITDA for the reported quarter skyrocketed 718.8% year over year to $262 million.

Operational Highlights

Production in the quarter totaled 1,505,000 tons, down around 7.5% year over year. Lower seasonal gas availability in Chile and the temporary suspension of one of its plants in New Zealand partially masked higher production at other sites. Total sales volume for the second quarter was 2,830,000 tons, increasing around 17.6% from the prior-year quarter’s figure.

Average realized price for methanol was $376 per ton in the quarter, increasing 78.2% from $211 in the prior-year quarter. A steady methanol demand and continuing industry supply bottlenecks led to higher methanol prices.

Financials

Cash and cash equivalents decreased 10.1% year over year to $764 million at the end of the second quarter. Long-term debt at the end of the second quarter was around $2,144 million, up nearly 2.6% year over year.

For the second quarter, cash flow from operating activities was $243 million, up around 30.6% year over year. The company paid out dividends worth $3 million during the reported quarter and recently increased the quarterly dividend to 12.5 cents per share from 3.75 cents.

Outlook

Methanex said that its outlook for the methanol industry is positive for the coming days, on the back of the ongoing favorable industry conditions. Strong methanol demand coupled with ongoing industry supply challenges continue to drive tight market conditions into the third quarter, the company noted. New industry supply and its Geismar 3 project are requisites for catering to the methanol demand growth. The company is optimistic about its Geismar 3 project to strengthen its portfolio and support its future cash generation, and also future shareholder distribution increases. It also anticipates the recent shipping partnership between its subsidiary, Waterfront Shipping, and Mitsui O.S.K. Lines, Ltd. to strengthen its financial position, going forward.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Methanex has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Methanex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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