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Westlake (WLK) Down 4.1% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Westlake Chemical (WLK - Free Report) . Shares have lost about 4.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Westlake due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Westlake's Earnings and Sales Beat Estimates in Q2
Westlake logged a second-quarter 2024 profit of $313 million or $2.40 per share, up from $297 million or $2.31 per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of $1.90.
Sales fell around 1.3% year over year to $3,207 million in the quarter. It surpassed the Zacks Consensus Estimate of $3,176.1 million. WLK witnessed strong demand for the majority of products in its HIP segment and higher average sales prices in the PEM unit compared with first-quarter 2024.
Segment Highlights
Sales in the PEM segment went down around 5.7% year over year to $2,013 million in the reported quarter. It was below our estimate of $2,046.8 million. Operating income in the segment was $157 million, a roughly 27% year-over-year decline. This fall was attributed to lower average sales prices for the majority of Westlake's major products, particularly caustic soda and PVC resin, which were somewhat offset by increased production and sales volume across the company's key products.
The HIP segment generated sales of $1,194 million, up around 7.1% from the year-ago quarter. The figure was above our estimate of $1,086 million. Operating income in the segment was $266 million, up roughly 40% from a year ago. The year-over-year rise was driven by increased production and sales volumes for all of Westlake's key products.
Financial Position
In the second quarter, net cash generated by operating activities was $237 million, with capital expenditures of $231 million. As of Jun 30, 2024, cash and cash equivalents totaled $3 billion, while total debt was $4.9 billion.
Outlook
Looking ahead, Westlake expects the HIP segment to continue benefiting from favorable structural factors such as the decade-long underinvestment in housing that followed the financial crisis, population growth, an aging housing stock and increased infrastructure investments spurred by the Infrastructure and Jobs Act.
While global industrial and manufacturing conditions have improved modestly, the company is taking steps to enhance PEM segment profitability, including the recently announced plan to temporarily cease operations at two units within the European epoxy business to align Westlake's manufacturing footprint and costs with changing global conditions.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted 5.44% due to these changes.
VGM Scores
Currently, Westlake has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Westlake has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Westlake (WLK) Down 4.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Westlake Chemical (WLK - Free Report) . Shares have lost about 4.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Westlake due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Westlake's Earnings and Sales Beat Estimates in Q2
Westlake logged a second-quarter 2024 profit of $313 million or $2.40 per share, up from $297 million or $2.31 per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of $1.90.
Sales fell around 1.3% year over year to $3,207 million in the quarter. It surpassed the Zacks Consensus Estimate of $3,176.1 million. WLK witnessed strong demand for the majority of products in its HIP segment and higher average sales prices in the PEM unit compared with first-quarter 2024.
Segment Highlights
Sales in the PEM segment went down around 5.7% year over year to $2,013 million in the reported quarter. It was below our estimate of $2,046.8 million. Operating income in the segment was $157 million, a roughly 27% year-over-year decline. This fall was attributed to lower average sales prices for the majority of Westlake's major products, particularly caustic soda and PVC resin, which were somewhat offset by increased production and sales volume across the company's key products.
The HIP segment generated sales of $1,194 million, up around 7.1% from the year-ago quarter. The figure was above our estimate of $1,086 million. Operating income in the segment was $266 million, up roughly 40% from a year ago. The year-over-year rise was driven by increased production and sales volumes for all of Westlake's key products.
Financial Position
In the second quarter, net cash generated by operating activities was $237 million, with capital expenditures of $231 million. As of Jun 30, 2024, cash and cash equivalents totaled $3 billion, while total debt was $4.9 billion.
Outlook
Looking ahead, Westlake expects the HIP segment to continue benefiting from favorable structural factors such as the decade-long underinvestment in housing that followed the financial crisis, population growth, an aging housing stock and increased infrastructure investments spurred by the Infrastructure and Jobs Act.
While global industrial and manufacturing conditions have improved modestly, the company is taking steps to enhance PEM segment profitability, including the recently announced plan to temporarily cease operations at two units within the European epoxy business to align Westlake's manufacturing footprint and costs with changing global conditions.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted 5.44% due to these changes.
VGM Scores
Currently, Westlake has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Westlake has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.