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Methanex Hits Fresh 52-Week High: What's Behind the Rally?

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Methanex Hits Fresh 52-Week High: What's Behind the Rally?

Strong demand and pricing fundamentals for methanol are contributing to the rally in Methanex's (MEOH) shares.

Shares of Methanex Corporation MEOH scaled a fresh 52-week high of $82.85 on Oct 3, before closing the day at $82.50.

The company has a market cap of roughly $6.4 billion and the average volume of shares traded in the last three months was around 413K. The company has an expected long-term earnings per share growth rate of 15%, higher than the industry average of 11.2%.

Methanex’s shares have gained 16.3% in the last three months, significantly outperforming the industry’s growth of 0.2%.

 



Driving Factors

Strong demand and pricing fundamentals for methanol and upbeat outlook has contributed to the stock rally.

Demand for methanol 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 throughout the year.

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.

Methanex, in its second-quarter call, noted that its outlook for the third quarter is favorable. The company expects its production level to be higher in the third quarter vis-à-vis the second quarter. The company envisions its adjusted EBITDA to be higher in the third quarter compared with the second. Strong methanol prices and higher production are expected to support the results.

Moreover, 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 returned $241 million in cash to shareholders in the form of dividends and share repurchases in the last quarter.

Methanex Corporation Price and Consensus

 

Methanex Corporation Price and Consensus | Methanex Corporation Quote

Zacks Rank & Stocks to Consider

Methanex is a Zacks Rank #3 (Hold) stock.

A few better-ranked companies in the basic materials space are Trinseo S.A. TSE, CF Industries Holdings, Inc. CF and Celanese Corporation CE.

Trinseo has an expected long-term earnings growth rate of 12% and a Zacks Rank #1 (Strong Buy). The company’s shares have gained 17.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

CF Industries has an expected long-term earnings growth rate of 6% and a Zacks Rank #2 (Buy). The company’s shares have rallied 58% in the past year.

Celanese has an expected long-term earnings growth rate of 10% and a Zacks Rank #2. Its shares have risen 5.5% in a year’s time.

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