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Here's Why Westlake Chemical (WLK) is a Good Investment Pick

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We believe that Westlake Chemical Corporation (WLK - Free Report) is a solid choice for investors seeking exposure in the chemical space. Its solid product offerings, strengthening demand, synergistic benefits from acquired assets and expansionary efforts bode well for the future.

The stock has been upgraded to a Zacks Rank #1 (Strong Buy) on Oct 13.

Why the Upgrade?

Sentiments have been positive for Westlake Chemical, as evident from 50.9% rally in its share price since the beginning of the year. The stock has outperformed 15.4% gain recorded by the industry it belongs to over the same period.



Also, the company’s earnings estimates for 2017 have been revised upward by one analyst, while that for 2018 has been increased by three. Currently, earnings estimates are pegged at $4.84 for 2017 and $5.72 for 2018, reflecting increase of 6.6% and 11.7% over their respective 60-day old estimates.

Westlake Chemical Corporation Price and Consensus
 

Westlake Chemical Corporation Price and Consensus | Westlake Chemical Corporation Quote

We believe that diversified businesses, including petrochemicals, polymers and building products, have created solid growth opportunities for Westlake Chemical. Notably, solid demand for its major products and favorable pricing primarily drove the second-quarter results. To leverage benefits from growing ethylene demand, the company expanded its Calvert City, Kentucky facility, adding 100 million pounds of generation capacity. Also, the company is working diligently to address the maintenance issues at some of its facilities.   

Additionally, Westlake Chemical’s Axiall buyout (completed in August 2016) has created a North American leader in Olefins and Vinyls. The deal has strengthened the company’s product portfolio, expanded manufacturing capabilities and increased geographical presence. With the integration progressing well, the company believes that it is on track to realize approximately $200 million in synergies and cost savings, of which roughly $120 million will accrue in 2017.

For 2017, Westlake Chemical anticipates spending $550 million to $600 million as capital expenditure for the improvement of its facilities. The company intends to maintain strong liquidity for funding growth investments in the quarters ahead. Returning value to shareholders remains a priority for the company, as evident from 10% increase in quarterly dividend rate announced in August 2017.

Other Stocks to Consider

Westlake Chemical has a market capitalization of approximately $10.9 billion. Other stocks worth considering in the chemical industry include JSR Corporation (JSCPY - Free Report) , Air Products and Chemicals, Inc. (APD - Free Report) and Trinseo S.A. (TSE - Free Report) . While JSR Corporation sports a Zacks Rank #1, Air Products and Trinseo carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

JSR Corporation’s earnings estimates for fiscal 2018 and fiscal 2019 improved in the last 60 days. Estimates for fiscal 2018 represent year-over-year growth of 13%.

Air Products and Chemicals’ earnings estimates for fiscal 2018 were revised upward in the last 60 days. It delivered an average positive earnings surprise of 1.77% for the last four quarters.

Trinseo’s earnings estimates for 2017 improved in the last 60 days. Also, it pulled off an average positive earnings surprise of 3.29% for the last four quarters.

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