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Methanex's (MEOH) Board Approves 5% Share Buyback Program

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Methanex Corporation’s (MEOH - Free Report) board of directors recently approved a Normal Course Issuer Bid (NCIB), which will enable the company to purchase for cancellation up to 3,863,298 common shares. Notably, this represents roughly 5% of its 77,265,973 shares issued and outstanding as of Mar 8, 2019.

Methanex stated that the purchases under the NCIB will start on Mar 18, 2019 and end no later than Mar 17, 2020. It will make purchases of the common shares from time to time at current market price, and all such shares bought under the NCIB will be cancelled.  

Per the president and CEO of Methanex, the new share repurchase program builds on a long track record of returning surplus cash to shareholders. Given its flexibility and financial strength, the company is poised to meet all of its financial commitments, pursue growth opportunities along with its commitment of returning excess cash to shareholders.

Moreover, share purchases pursuant to the NCIB will be conducted through the open market using the facilities of the Nasdaq Global Select Market and alternative trading systems in the United States, pursuant to rule 10b-18 under the Securities Exchange Act of 1934.

Daily repurchases under the program will not be more than 25% of the company’s average daily trading volume for the four-week period preceding the date of purchase. However, this is subject to certain exceptions for block purchases. Methanex has already inked an automatic securities purchase plan with its broker related to the purchases to be made under NCIB.

Methanex’s shares have gained 2.1% in the past year against the industry’s 16.3% decline.

Methanex’s adjusted earnings per share (barring one-time items) in the fourth quarter were $1.15, which missed the Zacks Consensus Estimate of $1.76.

The company’s cash flow from operating activities rose 5.8% year over year to $218 million in the fourth quarter. As of Dec 31, 2018, it had cash balance of $256 million.

Methanex returned $550 million to shareholders through dividend and share repurchases of 6.6 million common shares in 2018.

Going forward, it expects average realized methanol prices to be sequentially lower in the first quarter of 2019. It expects production levels to be similar to the fourth quarter.

Moreover, the company is witnessing a declining price environment. As a result, Methanex expects adjusted EBITDA to be sequentially lower in the first quarter, excluding any impact from the IFRS 16 lease accounting change.

Zacks Rank & Key Picks

Methanex currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd. (KL - Free Report) , Ingevity Corp. (NGVT - Free Report) and Materion Corp. (MTRN - Free Report) , all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland has an expected earnings growth rate of 8.8% for 2019. The company’s shares have surged 129.9% in the past year.

Ingevity has an expected earnings growth rate of 17.9% for 2019. The company’s shares have rallied 44% in a year’s time.

Materion has an expected earnings growth rate of 12.6% for 2019. Its shares have gained 8.8% in a year’s time.

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