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Westlake Chemical (WLK) Up 62% in 6 Months: Here's Why

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Shares of Westlake Chemical Corporation (WLK - Free Report) have shot up around 62% over the past six months. The company has also significantly outperformed its industry’s gain of roughly 37% to over the same time frame.  

Westlake Chemical has a market cap of roughly $13.6 billion. Average volume of shares traded in the last three months is around 821.4K. The company has an expected long-term earnings per share growth of 10.6%, just above the industry average of 10.3%.

Let’s take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.



 

Driving Factors

Forecast-topping earnings performance in the last reported quarter and upbeat outlook have contributed to a rally in Westlake Chemical’s shares. Westlake Chemical, last month, posted strong third-quarter results. Adjusted earnings of $1.65 per share topped the Zacks Consensus Estimate of $1.39, translating into a positive earnings surprise of 18.7%.

The company gained from significant contribution of Axiall acquisition, improved demand and increased selling prices for major products in the quarter.

Notably, Westlake Chemical has an impressive earnings surprise history as the company has topped the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 23.5%.

Westlake Chemical, in its third-quarter call, said that it benefited from increased demand for all major products in both Vinyls and Olefins segments along with higher prices in the Vinyls segment. The company sees increased ethylene availability with the start-up of new ethylene plants and completion of capacity expansions.

The company believes that the Axiall buyout and continued investments to improve the reliability and operational efficiency of its assets will enable it to fully leverage the improving Vinyls market. It also sees favorable demand trends for all of its major products to continue moving ahead.

Westlake Chemical should continue to benefit from the Axiall acquisition. The acquisition has diversified the company’s product portfolio and geographical operations, creating a North American leader in Olefins and Vinyls. The company is on track to realize around $120 million in synergies and cost savings related to the acquisition in 2017.

Other Stocks to Consider

Other top-ranked companies in the basic materials space include Koppers Holdings Inc. (KOP - Free Report) , Kronos Worldwide, Inc. (KRO - Free Report) and Huntsman Corporation (HUN - Free Report) , all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Koppers has an expected long-term earnings growth of 18%. The stock has gained around 28% year to date.

Kronos has an expected long-term earnings growth of 5%. The stock has gained around 121% year to date.

Huntsman has an expected long-term earnings growth of 8%. The stock has gained around 75% year to date.

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