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Westlake Chemical (WLK) Q1 Earnings Beat Estimates, Sales Lag

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Westlake Chemical Corporation (WLK - Free Report) posted a profit of $145 million or $1.13 per share for the first quarter of 2020, up 101.4% from $72 million or 55 cents per share earned in the year-ago quarter.

The increase was mainly attributed to the income tax benefit of $62 million, arising from the carryback of federal net operating losses.

Barring one-time items, adjusted earnings per share were 65 cents in the quarter. The metric surpassed the Zacks Consensus Estimate of 57 cents.

Sales fell 4.6% year over year to $1,932 million. The figure also missed the Zacks Consensus Estimate of $1,937.5 million.

Westlake Chemical Corporation Price, Consensus and EPS Surprise


Segment Highlights

Sales in the Olefins segment fell 7% year over year to $427 million in the reported quarter. Operating income in the segment rose 67.6% to $62 million. The increase was mainly due to higher polyethylene sales volumes, and lower feedstock and fuel costs, which were in part, offset by reduced polyethylene sales prices.

The Vinyls segment generated sales of $1,505 million, down 3.9% year over year. Operating income in the segment was $73 million, down 27.7% year over year. The decline was caused by reduced sales prices for caustic soda and PVC (polyvinyl chloride) resin.

Financial Position

Westlake Chemical ended the quarter with cash and cash equivalents of $1,537 million, up 245.4% year over year. Long-term debt was $4,432 million, up 66% year over year.

Cash flow from operations was $61 million in the quarter, down 58.5% year over year.


Westlake Chemical said that it remains focused on lowering its cost position and generating economic value over the business cycle. The company believes that its competitive position coupled with a strong balance sheet has positioned it to weather the current environment.

It now expects capital expenditure of $500-$550 million for 2020.

Price Performance

Shares of Westlake Chemical have lost 34.2% in a year compared with the industry’s 41.9% decline.



Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space are Equinox Gold Corp. (EQX - Free Report) , Franco-Nevada Corporation (FNV - Free Report) and Newmont Corporation (NEM - Free Report) .

Equinox Gold currently sports a Zacks Rank #1 (Strong Buy) and has a projected earnings growth rate of 231% for 2020. The company’s shares have gained 49.2% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Franco-Nevada has a projected earnings growth rate of 22% for 2020. It currently carries a Zacks Rank #2 (Buy). The company’s shares have rallied 100.5% in a year.

Newmont has a projected earnings growth rate of 95.5% for the current year. The company’s shares have rallied around 103% in a year. It currently has a Zacks Rank #2.

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