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Westlake Chemical Up 28% in 6 Months: What's Driving It?

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Shares of Westlake Chemical Corporation (WLK - Free Report) have popped around 28% over the last six months. The company has also outperformed its industry’s gain of roughly 15% to over the same time frame.  

Westlake Chemical, a Zacks Rank #1 (Strong Buy) stock, has a market cap of roughly $15.6 billion. Average volume of shares traded in the last three months is around 827.9K. The company has an expected long-term earnings per share growth of 12.2%.

Let’s take a look into the factors that are driving this chemical company.

Driving Factors

Forecast-topping earnings performance in the last reported quarter and an upbeat outlook have contributed to a rally in Westlake Chemical’s shares. Westlake Chemical saw its profits jump roughly two-fold year over year in the first quarter, boosted by higher selling prices for key products, increased sales volumes for caustic soda and PVC (polyvinyl chloride) resin, benefits of lower U.S. corporate tax rate and a gain from redemption of debt.

Adjusted earnings for the quarter were $2.24 per share, which topped the Zacks Consensus Estimate of $2.09.

Revenues rose roughly 11% year over year to $2,150 million, coming ahead of the Zacks Consensus Estimate of $2,101 million. Sales in the quarter benefited from higher prices for major products and increased sales volumes for caustic soda and PVC resin that more than offset reduced polyethylene sales volume.

Westlake Chemical, in its first-quarter call, noted that demand for products across its segments remains strong due to continued growth in the Americas, Europe and Asia. Moreover, it is benefiting from the investments made last year to improve its operations and reliability.

Annual estimates for Westlake Chemical have also moved north over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2018 has increased by around 9.3% to $8.57 per share. The Zacks Consensus Estimate for 2019 has also moved up roughly 8.5% over the same timeframe to $8.95.

The Zacks Consensus Estimate for earnings for 2018 reflects an expected year-over-year growth of around 56.7%.

Westlake Chemical is gaining from contributions of Axiall acquisition, increased demand and higher selling prices for major products. The Axiall acquisition has diversified the company’s product portfolio and geographical operations, creating a North American leader in Olefins and Vinyls. The company expects to realize $250 million of cost reduction synergies related to the acquisition in 2018.

Westlake Chemical is also working diligently on the recently announced expansions in its Vinyls segment. This additional production capacity will help the company to address the growing needs of its global customers.

Other Stocks to Consider

Other top-ranked stocks in the basic materials space include The Chemours Company (CC - Free Report) , Huntsman Corporation (HUN - Free Report) and Methanex Corporation (MEOH - Free Report) .

Chemours has an expected long-term earnings growth rate of 15.50% and flaunts a Zacks Rank #1. Its shares have gained roughly 22% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntsman has an expected long-term earnings growth rate of 8.3% and flaunts a Zacks Rank #1. The company’s shares have moved up around 27% in a year.

Methanex has an expected long-term earnings growth rate of 15% and carries a Zacks Rank #2 (Buy). Its shares have rallied roughly 65% over a year.

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