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Methanex (MEOH) Up 32% in a Year: What's Driving the Stock?

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Shares of Methanex Corporation MEOH have rallied 31.9% over a year, outperforming the industry’s gain of roughly 15.6%.

 

 

Methanex has a market cap of roughly $4.9 billion and average volume of shares traded in the last three months is around 667.4K. The company has expected long-term earnings per share growth of 15%.

Let’s take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.

Driving Factors

Forecast-topping fourth-quarter 2017 earnings performance and strong demand fundamentals for methanol have contributed to the rally in Methanex’s shares.

Methanex’s net profit (attributable to shareholders) increased nearly three-folds in the fourth quarter from $24 million or 28 cents a year ago to $68 million or 81 cents. Adjusted earnings of $1.70 per share also trounced the Zacks Consensus Estimate of $1.19. Notably, the company surpassed the Zacks Consensus Estimate in three of the four trailing quarters, while missing in one, with an average positive surprise of 9.1%.

Methanex is poised to gain from healthy demand fundamentals for methanol, which has been driven by both traditional derivatives and energy-related applications in Asia, particularly in China.

Moreover, higher methanol prices should also boost its margins. Last year, the company’s average realized prices for methanol jumped roughly 39% year over year, while the same rose 26% in the fourth quarter. Methanex noted that methanol prices improved in the fourth quarter and into the early 2018, supported by methanol supply challenges and healthy demand.  Sequentially, the company expects higher average methanol prices in first-quarter 2018.

Meanwhile, the company’s Chile IV plant is progressing with its restart process and is expected to be complete by third-quarter 2018. The company expects production from its Chile operations to be higher year-over-year in 2018.

Methanex is also committed to boost shareholder returns by leveraging its solid liquidity position. The company returned $388 million in cash to shareholders in the form of dividend and share repurchases last year.

Moreover, last month, the company announced a 10% hike in its quarterly dividend to 33 cents per share. Methanex’s board also recently approved a new share repurchase program authorizing it to buyback up to 6,590,095 common shares.

 

Methanex Corporation Price and Consensus

 

Methanex Corporation Price and Consensus | Methanex Corporation Quote

 

Other Stocks to Consider

A few other top-ranked stocks in the basic materials space are LyondellBasell Industries N.V. LYB, CF Industries Holdings, Inc. CF and Daqo New Energy Corp. DQ, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

LyondellBasell has an expected long-term earnings growth rate of 9%. Its shares have moved up 21.7% over a year.

CF Industries has an expected long-term earnings growth rate of 8%. Its shares have gained 27.7% over a year.

Daqo New Energy has an expected long-term earnings growth rate of 7%. Its shares have rallied 131.8% over a year.

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