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Methanex (MEOH) Up 41% in a Year: What's Working in Favor?

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Shares of Methanex Corporation (MEOH - Free Report) have rallied around 41% over a year, significantly outperforming the industry’s rise of roughly 3%. The stock is also up around 19% year to date.

Methanex, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $5.8 billion and average volume of shares traded in the last three months was around 390.3K. The company has an expected long-term earnings per share growth rate of 15%, higher than the industry average of 11.3%.  

Let’s delve deeper into the factors that are driving this chemical company.



 

Driving Factors

Forecast-topping second-quarter earnings performance and strong demand and pricing fundamentals for methanol have contributed to the run up in Methanex’s shares.

The company’s adjusted earnings of $1.75 per share for the second quarter topped the Zacks Consensus Estimate of $1.70. Revenues also surged roughly 42% year over year to $950 million in the quarter on the back of higher methanol prices.

Notably, the company surpassed the Zacks Consensus Estimate in three of the four trailing quarters, delivering an average positive surprise of 13.1%.

Earnings estimates for Methanex 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 13.5% to $7.30. The Zacks Consensus Estimate for third-quarter 2018 has also shot up 101% over the same timeframe to $2.01.

The Zacks Consensus Estimate for earnings for 2018 reflects an expected year-over-year growth of 55%. For the third quarter, earnings are expected to rise a staggering 235% year over year.

Methanex is gaining from higher demand for methanol. 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 second quarter of 2018 and is expected to remain healthy in 2018.

Moreover, higher methanol prices are boosting the company’s revenues and margins. In the second quarter, the company’s average realized prices for methanol climbed roughly 24% year over year.

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

Methanex Corporation Price and Consensus

 

Methanex Corporation Price and Consensus | Methanex Corporation Quote

Stocks to Consider

Stocks worth considering in the basic materials space include Celanese Corporation (CE - Free Report) , Ingevity Corporation (NGVT - Free Report) and Huntsman Corporation (HUN - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celanese has an expected long-term earnings growth rate of 10%. The company’s shares have gained around 17% in a year.

Ingevity has an expected long-term earnings growth rate of 12%. The company’s shares have rallied around 63% in a year.

Huntsman has an expected long-term earnings growth rate of 8.5%. Its shares have gained roughly 6% over a year.

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