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Why Is Methanex (MEOH) Up 17.6% Since Last Earnings Report?

Zacks Equity Research
·3 mins read

A month has gone by since the last earnings report for Methanex (MEOH). Shares have added about 17.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Methanex due for a pullback? 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 catalysts.

Methanex's Earnings Beat, Revenues Miss Estimates in Q2

Methanex slipped to a loss (attributable to shareholders) of $65 million or 85 cents per share in the second quarter of 2020 from a profit of $50 million or 51 cents per share in the year-ago quarter.

Adjusted loss per share (barring one-time items) in the reported quarter was 84 cents, which was narrower than the Zacks Consensus Estimate of a loss of $1.05.

Revenues declined 39.6% year over year to $512 million in the quarter. The results were impacted by lower year-over-year methanol prices. Moreover, it missed the Zacks Consensus Estimate of $593 million.

Adjusted EBITDA tumbled 78% year over year to $32 million.

Operational Highlights

Production in the quarter totaled 1,628,000 tons, down 10.5% year over year. Total sales volume was 2,406,000 tons, down 7.5% year over year.

Average realized price for methanol was $211 per ton in the quarter, down 35.3% from $326 in the prior-year quarter.

Financials

For the reported quarter, cash flow from operating activities was $186 million, up 58.9% year over year. The company had cash and cash equivalents of $783 million, up 243.4% year over year.

Outlook

Methanex is seeing signs of improving methanol demand with global economic activity starting to recover and oil pricing stabilizing in recent weeks. Notably, it stated that it cannot accurately forecast the short-term outlook due to uncertainties regarding the duration and extent of the coronavirus pandemic, and the low oil price environment.

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 10.23% due to these changes.

VGM Scores

Currently, Methanex has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, 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 B. 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. Notably, Methanex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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