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Methanex (MEOH) Up 12% in 3 Months: What's Driving the Stock?

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Shares of Methanex Corporation (MEOH - Free Report) have popped around 12% over the past three months, significantly outperforming the industry’s gain of roughly 1.3%.

Methanex, a Zacks Rank #1 (Strong Buy) stock, has a market cap of roughly $6 billion and average volume of shares traded in the last three months was around 586K. The company has an expected long-term earnings per share growth rate of 15%, higher than the industry average of 10.1%.  

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


 

Driving Factors

Strong demand and pricing fundamentals for methanol have contributed to the run up in Methanex’s shares. Demand has been driven by both traditional derivatives and energy-related applications in Asia, particularly in China. Per the company, global demand for methanol increased 4% year over year in the first quarter and is expected to remain healthy in 2018.

Moreover, higher methanol prices are boosting the company’s revenues and margins. In the first quarter, the company’s average realized prices for methanol went up roughly 10% year over year, while the same rose 15% sequentially.

The company’s profits rose around 28% year over year in the first quarter. Revenues also increased roughly 18.8% year over year to $962 million in the quarter on the back of higher prices.

Moreover, Methanex remains on track with its plans of capitalizing on near-term growth opportunities in Chile. Methanex’s Chile IV plant is also progressing with its restart process and is expected to be complete by third-quarter 2018.

With a committed revolving credit facility, strong balance sheet and healthy cash-generation capability, the company believes that it is well positioned to meet its financial commitments, execute growth opportunities and return excess cash to shareholders through dividends and share repurchases.

Earnings estimates for Methanex have also moved north over the past two month, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2018 has increased by around 7% to $6.43. The Zacks Consensus Estimate for second-quarter 2018 has also moved up 6.9% over the same timeframe to $1.70.

The Zacks Consensus Estimate for earnings for 2018 reflects an expected year-over-year growth of 36.5%. For second-quarter 2018, earnings are expected to rise 100% year over year.

Methanex Corporation Price and Consensus

 

Methanex Corporation Price and Consensus | Methanex Corporation Quote

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Westlake Chemical Corporation (WLK - Free Report) , Rayonier Advanced Materials Inc. (RYAM - Free Report) and Versum Materials, Inc. (VSM - Free Report) , each carrying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 62% over a year.

Rayonier Advanced Materials has an expected long-term earnings growth rate of 20.1%. The company’s shares have gained around 13% in a year.

Versum has an expected long-term earnings growth rate of 13%. Its shares have gained roughly 17% over a year.

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