Westlake (WLK) Down 3.6% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Westlake Chemical (WLK). Shares have lost about 3.6% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Westlake's Earnings & Revenues Top Estimates in Q1
Westlake logged a profit of $756 million or $5.83 per share in the first quarter of 2022, rising from $242 million or $1.87 cents per share in the year-ago quarter. The bottom line topped the Zacks Consensus Estimate of $4.70 per share.
Sales climbed around 72% year over year to $4,056 million in the quarter. It also outpaced the Zacks Consensus Estimate of $3,440.2 million. The top line was boosted by higher sales prices across most of the company’s businesses. Westlake also gained from contributions of the new businesses acquired in second-half 2021 and early this year.
Westlake benefited from the continued strength in the residential construction market on strong repair and remodeling markets, which led to strong demand and pricing for PVC resin and higher demand in its Housing and Infrastructure Products unit. The company’s Performance and Essential Materials business also witnessed strength in polyethylene for packaging and consumer markets.
Segment Highlights
Sales in the Performance and Essential Materials segment went up around 63% year over year to $2,832 million in the reported quarter. Operating income in the segment was $879 million, a roughly three-fold year-over-year increase. The upside was led by higher prices for major products in the segment on the back of strong demand in manufacturing, packaging and construction markets.
The Housing and Infrastructure Products segment generated sales of $1,224 million, nearly doubling from the year-ago quarter. Operating income in the segment was $185 million, up around 161% from a year ago. The upside was mainly due to strong housing and remodeling activity that led to healthy demand and increased prices for all products in the segment.
Financial Position
Westlake ended the quarter with cash and cash equivalents of $1,055 million, down around 24% year over year. Long-term debt was $4,902 million, up around 38%.
Cash flow from operations was $700 million in the reported quarter, up roughly 164% year over year.
Outlook
The company said that market conditions remain favorable amid the volatility driven by economic and geopolitical factors that could impact its businesses. Westlake remains confident in its business fundamentals, which it expects to allow it to deliver more resilient earnings and cash flows in a variety of economic environments.
Westlake reaffirmed its capital expenditures guidance in the band of $750- $850 million for 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 21.5% due to these changes.
VGM Scores
Currently, Westlake has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Westlake has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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