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Westlake Chemical Reported Disappointing Q4 Earnings


Feb. 26 2019, Updated 9:00 a.m. ET

Westlake Chemical

On February 19, Westlake Chemical (WLK) announced its fourth-quarter earnings. The company reported an adjusted EPS of $0.95—compared to $1.62 in the same quarter the previous year. The EPS represented a decline of 42.4%. Westlake Chemical reported sales of just under $2.0 billion compared to $2.01 billion in the fourth quarter of 2017.

The decline in Westlake Chemical’s EPS was mainly due to higher ethane feedstock stocks, lower sales prices for polyethylene and polyvinyl chloride, and higher fuel costs due to increased natural gas prices.

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Albert Chao, Westlake Chemical’s president and CEO, said, “We are very pleased with our 2018 results with records for both income from operations and EBITDA. We saw solid demand for all of our major products in both the domestic and export markets while benefitting from the investments we made since our acquisition of Axiall to improve our operations and reliability.”

The disappointment caused several analysts to cut their target price on Westlake Chemical. Cowen cut Westlake Chemical’s target price to $78, while Instinet cut the target price to $70.00.

Stock price update

Westlake Chemical saw a significant decline in its stock price. The stock fell 6.6% for the week and closed at $75.57. However, the stock still traded 3.1% above its 100-day moving average price of $73.28. Westlake Chemical’s 100-day moving average has fallen from a peak of $108.64 in the past six months.

On a year-to-date basis, Westlake Chemical has risen 17%, while Eastman Chemical (EMN), Celanese (CE), and LyondellBasell (LYB) have risen 16.8, 15.9%, and 8.2%, respectively. Westlake Chemical’s 14-day relative strength index of 50 indicates that the stock isn’t overbought or oversold.

Investors could hold Westlake Chemical indirectly by investing in the PowerShares DWA Basic Materials Momentum Portfolio ETF (PYZ). PYZ invests 2.1% of its portfolio in Westlake Chemical.


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