Westlake Chemical (WLK) Q3 Earnings Top Estimates, Sales Lag

Westlake Chemical Corporation (NYSE:WLK) saw lower profits in the third quarter of 2019, hurt by reduced sales prices for its major products. The chemical maker posted a profit of $158 million or $1.22 per share for the quarter, down around 49% from $308 million or $2.35 it earned in the year-ago quarter. However, earnings topped the Zacks Consensus Estimate of $1.02.

Sales fell roughly 8% year over year to $2,066 million. The figure also missed the Zacks Consensus Estimate of $2,131.4 million.

Lower global sales prices for key products due to trade uncertainties and a slower global economic growth were, in part, masked by reduced ethane feedstock and fuel costs.

Segment Highlights

Sales in the Olefins segment fell 17% year over year to $448 million in the quarter. Operating income in the segment tumbled roughly 43% to $92 million. The decline was mainly due to reduced sales prices for major products resulting from higher olefins production.

The Vinyls segment generated sales of $1,618 million, down around 6% year over year. Operating income in the segment was $153 million, down around 39% year over year. The decline was caused by reduced sales prices for caustic soda and PVC (polyvinyl chloride) resin.

Financial Position

Westlake Chemical ended the quarter with cash and cash equivalents of $1,437 million, up around 82% year over year. Long-term debt was $3,424 million, up 28% year over year.

Cash flow from operations was $968 million for the first nine months of 2019, down around 16% year over year. Cash flow from operations was $501 million for the reported quarter.

Outlook

Westlake Chemical noted that it is facing challenges from a difficult pricing environment due to slower global growth as a result of trade tensions. Amid this backdrop, the company remains focused on controlling costs and investing in a number of initiatives globally which it expects to boost long-term value for shareholders.

Price Performance

Shares of Westlake Chemical have lost 6.2% in a year’s time compared with the industry’s 15.9% decline.

Zacks Rank & Key Picks

Westlake Chemical currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks worth a look in the basic materials space include Agnico Eagle Mines Limited (NYSE:AEM) , Kinross Gold Corporation (NYSE:KGC) and Franco-Nevada Corporation (TSX:FNV) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 168.6% for the current year. The company’s shares have rallied 64% in a year’s time.

Kinross has projected earnings growth rate of 210% for the current year. The company’s shares have surged around 77% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 39.3% for the current year. The company’s shares have gained roughly 46% in a year’s time.

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