Methanex (MEOH) Down 21.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Methanex (MEOH). Shares have lost about 21.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Methanex 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.

Methanex's Earnings Miss, Revenues Beat Estimates in Q4

Methanex posted profits (attributable to shareholders) of $9 million or 12 cents per share in the fourth quarter of 2019, down from $161 million or $1.68 per share in the year-ago quarter.

Adjusted earnings per share (barring one-time items) in the reported quarter were 13 cents, which missed the Zacks Consensus Estimate of 26 cents.

Revenues declined 32.6% year over year to $658.7 million in the quarter. However, it surpassed the Zacks Consensus Estimate of $621 million.

Adjusted EBITDA tumbled 30.9% year over year to $136 million. The results were impacted by lower average realized methanol prices.

Operational Highlights

Production in the quarter totaled 2,124,000 tons, up 12.7% year over year. Total sales volume was 2,986,000 tons, up 8.5% year over year.

Average realized price for methanol was $256 per ton in the quarter, down 36.2% from $401 in the prior-year quarter.

2019 Highlights

For 2019, revenues declined 29.2% year over year to $2,784 million. The company recorded adjusted net income of $71 million or 93 cents per share, down from $556 million or $6.86 in the year-ago quarter.

Financials

For the reported quarter, cash flow from operating activities was $114 million, down 47.7% year over year. The company had cash and cash equivalents of $417 million, up 62.9% year over year.

Methanex returned $27 million to shareholders through regular dividend payouts during the fourth quarter.

Outlook

The company anticipates its Geismar 3 project to deliver strong returns on significant capital and operating cost advantages. Over the coming years, most of the large-scale capacity additions are anticipated to be in the Americas and the Middle East. Further, the company expects new non-integrated capacity additions in China to be modest on continuous restrictions by the government in China.

The company will also remain committed to execute its Louisiana growth projects and return excess cash to shareholders through dividends and share buybacks.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 7.69% 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 this revision looks promising. Notably, Methanex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.