A month has gone by since the last earnings report for Westlake Chemical (
WLK Quick Quote WLK - Free Report) . Shares have lost about 10.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Westlake due for a breakout? 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 drivers.
Westlake Misses Q4 Earnings and Revenue Estimates
Westlake logged a profit of $232 million or $1.79 per share in the fourth quarter of 2022, down from $644 million or $4.98 per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate of $2.24 per share.
The results in the reported quarter were hurt by reduced sales prices, unfavorable sales mix changes, higher energy costs and lower volumes in certain product categories. Sales fell around 6% year over year to $3,299 million in the quarter. It missed the Zacks Consensus Estimate of $3,310.6 million. Westlake was impacted by softer demand in most geographies and product categories in the quarter. Segment Highlights
Sales in the Performance and Essential Materials segment went down around 4% year over year to $2,361 million in the reported quarter. Operating income in the segment was $219 million, a roughly 73% year-over-year decline. The downside was due to reduced sales prices for key products, lower sales volumes, unfavorable mix and increased global fuel and power prices. These were partly offset by higher global sales prices for caustic soda and chlorine.
The Housing and Infrastructure Products segment generated sales of $938 million, down around 12% from the year-ago quarter. Operating income in the segment was $68 million, down around 21% from a year ago. The downside was due to reduced operating rates and sales volumes that more than offset higher sales prices across most product categories. FY22 Results
Earnings for full-year 2022 were $17.34 per share compared with $15.58 per share a year ago. Net sales rose around 34% year over year to $15,794 million.
Financial Position Westlake ended 2022 with cash and cash equivalents of $2,228 million, up around 17% year over year. Long-term debt was $4,879 million, down around 0.7% year over year. Net cash provided by operating activities was $3,395 million in 2022. Outlook
Westlake expects the Performance and Essential Materials unit to run profitably at higher operating rates on the back of its North American footprint that leverages a structural global cost advantage in feedstocks, fuel and power. The division is also expected to benefit from stabilizing power and fuel costs in Europe and the potential for improving economic growth in China.
In Housing and Infrastructure Products, the company envisions the slowdown of residential construction to continue in response to historically low home affordability. However, it sees moderate growth in repair and remodeling activity. How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -10.7% due to these changes.
Currently, Westlake has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Westlake has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.