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Tale of the Tape

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Westlake Chemical (WLK) Misses Q3 Earnings & Sales Estimates
November 08, 2016

WLK

Trades from $3

Westlake Chemical (WLK - Free Report) is a vertically integrated international producer and supplier of petrochemicals, polymers and fabricated products. The company's range of products includes ethylene, polyethylene, styrene, vinyl intermediates, PVC, PVC Pipe, PVC windows, fence and decking components.

The Houston, TX, based company is focusing on its expansion plans, to lower costs, by adding 250 million pounds of capacity at the Lake Charles site and 100 million pounds at Calvert City. The company also recently completed the acquisition of Axiall Corp. The transaction is expected to deliver annual cost synergies of roughly $100 million.

Let’s have a quick look at the company’s third-quarter 2016 release.

Estimate Trend & Surprise History

Investors should note that the earnings estimate for Westlake Chemical for the third quarter has seen a downtrend over the last month. The company has beaten the Zacks Consensus Estimate in 2 of the trailing 4 quarters while meeting once and missing once, with an average positive surprise of 5.59%.

WESTLAKE CHEM Price and EPS Surprise

 

WESTLAKE CHEM Price and EPS Surprise | WESTLAKE CHEM Quote

Earnings

Westlake Chemical’s adjusted earnings came in at 86 cents per share in the quarter, which missed the Zacks Consensus Estimate of 90 cents. Reported earnings of 51 cents per share fell 63% year over year.

Revenues

Westlake Chemical reported revenues of $1,279 million, up around 7.7% year over year. However, it narrowly missed the Zacks Consensus Estimate of $1,289 million.

Key Developments to Note

Sales in the quarter benefited from the contribution of Axiall as well as higher selling price across key products, partly offset by lower volumes. Income from operations at the Olefins segment decreased from the prior year quarter due to lower sales prices and production as well as the lost sales. Moreover, unabsorbed fixed manufacturing costs along with other costs related to the turnaround and expansion of the Lake Charles Petro 1 ethylene unit and other planned turnarounds during the quarter negatively impacted income.

Income from operations at the Vinyls segment also decreased year over year. The fall was due to lost sales and lower production rates and higher costs. The costs included unabsorbed fixed manufacturing costs along with costs related to the unplanned outage at the Calvert City facility and other planned turnarounds at European facilities. Moreover, the impact of selling higher cost Axiall inventory recorded at fair value also affected income.

Zacks Rank

Currently, Westlake Chemical has a Zacks Rank #3 (Hold), but that could change following its earnings report which was just released.

Market Reaction

Westlake Chemical’s shares fell around 2.6% in the pre-market trading. It would be interesting to see how the market reacts to the results during the trading session today.

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