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Why You Should Add Methanex (MEOH) Stock to Your Portfolio
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Methanex Corporation (MEOH - Free Report) looks promising at the moment. It is well-positioned to benefit from an improvement in methanol pricing. It also remains committed to strengthening its balance sheet.
Shares of Methanex are up 18.8% so far this year compared with a 1.5% rise of its industry.
Image Source: Zacks Investment Research
We are optimistic about the company’s prospects and believe that the time is right for you to add the stock to the portfolio.
Let’s see what makes this Zacks Rank #1 (Strong Buy) stock an attractive investment option at the moment.
Estimates Going Up
Over the past 90 days, the Zacks Consensus Estimate for Methanex for first-quarter 2023 has increased 7.1%. The consensus estimate for 2023 has been revised 8.8% upward over the same time frame
Valuation Looks Attractive
Methanex’s shares are currently trading at a lower level than the industry average, suggesting that the stock still has upside potential.
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Methanex is currently trading at a trailing 12-month EV/EBITDA multiple of 5.08, cheaper than the industry average of 7.66.
Improved Pricing to Drive Margins
Methanex is benefiting from healthy prices caused by methanol industry supply issues, which have resulted in an increase in methanol prices. In the second half of 2022, the company gained from a higher average realized price. While prices remained unchanged sequentially in the fourth quarter of 2022, the company expects methanol prices to remain strong in the year. Moving forward, healthy prices are likely to drive its bottom line.
Growth Drivers in Place
Methanex is advancing with the construction of its Geismar 3 project as planned. The project is on track to be finished on time and budget by the fourth quarter of 2023. It is expected to improve the company's asset portfolio and future cash flow. It is also likely to provide long-term value to shareholders and lower the carbon dioxide intensity of the company's asset portfolio.
The project's capital cost is anticipated to be between $1.25 and $1.3 billion, with approximately $910 million already spent by MEOH as of fourth-quarter 2022. Methanex anticipates remaining capital costs of $415-$465 million, which will be completely funded with cash on hand.
The company also remains committed to boosting its balance sheet and conserving liquidity. At the end of the fourth quarter of 2022, its cash and cash equivalents were $857.7 million. The cash flow from operations was $978 million in 2022. MEOH seeks to fulfill its future financial commitments, pursue attractive development prospects and return excess cash to shareholders through dividends and share repurchases. It is focused on running its plants safely and reliably, maintaining a healthy financial position, and providing secure and reliable supplies to its customers.
Other top-ranked stocks worth considering in the Basic Materials space include Steel Dynamics Inc. (STLD - Free Report) , PPG Industries, Inc. (PPG - Free Report) and Linde plc (LIN - Free Report) .
Steel Dynamics carries a Zacks Rank #1. The Zacks Consensus Estimate for STLD’s current-year earnings has been revised 10.4% upward in the past 60 days. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 11.3%. STLD has rallied roughly 20.7% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
PPG carries a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 15.3% upward in the past 60 days. Earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 8%. PPG has gained roughly 7.6% in a year.
Linde carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has been revised 0.65% upward in the past 60 days. Earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 5.9%. LIN has gained roughly 12.8% in a year.
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Why You Should Add Methanex (MEOH) Stock to Your Portfolio
Methanex Corporation (MEOH - Free Report) looks promising at the moment. It is well-positioned to benefit from an improvement in methanol pricing. It also remains committed to strengthening its balance sheet.
Shares of Methanex are up 18.8% so far this year compared with a 1.5% rise of its industry.
Image Source: Zacks Investment Research
We are optimistic about the company’s prospects and believe that the time is right for you to add the stock to the portfolio.
Let’s see what makes this Zacks Rank #1 (Strong Buy) stock an attractive investment option at the moment.
Estimates Going Up
Over the past 90 days, the Zacks Consensus Estimate for Methanex for first-quarter 2023 has increased 7.1%. The consensus estimate for 2023 has been revised 8.8% upward over the same time frame
Valuation Looks Attractive
Methanex’s shares are currently trading at a lower level than the industry average, suggesting that the stock still has upside potential.
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Methanex is currently trading at a trailing 12-month EV/EBITDA multiple of 5.08, cheaper than the industry average of 7.66.
Improved Pricing to Drive Margins
Methanex is benefiting from healthy prices caused by methanol industry supply issues, which have resulted in an increase in methanol prices. In the second half of 2022, the company gained from a higher average realized price. While prices remained unchanged sequentially in the fourth quarter of 2022, the company expects methanol prices to remain strong in the year. Moving forward, healthy prices are likely to drive its bottom line.
Growth Drivers in Place
Methanex is advancing with the construction of its Geismar 3 project as planned. The project is on track to be finished on time and budget by the fourth quarter of 2023. It is expected to improve the company's asset portfolio and future cash flow. It is also likely to provide long-term value to shareholders and lower the carbon dioxide intensity of the company's asset portfolio.
The project's capital cost is anticipated to be between $1.25 and $1.3 billion, with approximately $910 million already spent by MEOH as of fourth-quarter 2022. Methanex anticipates remaining capital costs of $415-$465 million, which will be completely funded with cash on hand.
The company also remains committed to boosting its balance sheet and conserving liquidity. At the end of the fourth quarter of 2022, its cash and cash equivalents were $857.7 million. The cash flow from operations was $978 million in 2022. MEOH seeks to fulfill its future financial commitments, pursue attractive development prospects and return excess cash to shareholders through dividends and share repurchases. It is focused on running its plants safely and reliably, maintaining a healthy financial position, and providing secure and reliable supplies to its customers.
Methanex Corporation Price and Consensus
Methanex Corporation price-consensus-chart | Methanex Corporation Quote
Other Stocks to Consider
Other top-ranked stocks worth considering in the Basic Materials space include Steel Dynamics Inc. (STLD - Free Report) , PPG Industries, Inc. (PPG - Free Report) and Linde plc (LIN - Free Report) .
Steel Dynamics carries a Zacks Rank #1. The Zacks Consensus Estimate for STLD’s current-year earnings has been revised 10.4% upward in the past 60 days. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 11.3%. STLD has rallied roughly 20.7% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
PPG carries a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 15.3% upward in the past 60 days. Earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 8%. PPG has gained roughly 7.6% in a year.
Linde carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has been revised 0.65% upward in the past 60 days. Earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 5.9%. LIN has gained roughly 12.8% in a year.