Why is Westlake (WLK) up 6.7% since its last earnings report?

About a month has passed since Westlake Chemical (WLK) last reported earnings. Shares have risen about 6.7% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Westlake headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

Westlake’s earnings and revenues topped estimates in the first quarter

Westlake reported earnings of $174 million, or $1.34 per share, in the first quarter of 2024, compared with $394 million, or $3.05 per share, in the same quarter last year. The earnings beat the Zacks Consensus Estimate of $1.09.

Sales declined approximately 11.3% year-over-year to $2,975 million in the quarter. The high surpassed the Zacks Consensus Estimate of $2,946.1 million.

The most important information in the segment

The Performance and Essential Materials segment saw sales decline 17.8% from year-ago levels, bringing in revenue of $1,931 million in the most recent quarter. This amount was lower than our projected estimate of $2,001 million. Segment operating revenues were $22 million, compared to $403 million reported in the first quarter of 2023. The decline was primarily due to a decline in average selling prices for several key products, particularly caustic soda and epoxy resin. Despite lower average selling prices, the impact was partially mitigated by an increase in sales volume during the quarter.

The Residential and Infrastructure Products segment achieved sales of $1,044 million, up 3.7% year-over-year. This figure exceeded our estimate of $924.7 million. Segment operating income was $210 million, an increase of $67 million compared to the first quarter of 2023 levels. The growth was driven by an increase in sales volume, especially of pipes and fittings, and a decrease in material costs.

Financial position

In the first quarter of 2024, net cash generated from operations was $169 million. Total cash and cash equivalents as of March 31, 2024 were $3,108 million and long-term debt was $4,590 million. Capital expenditure amounted to $272 million. Free cash flow was $291 million for the quarter.

Perspectives

The company sees continued growth in the Housing and Infrastructure Products segment despite high inflation and interest rates. This is primarily due to the limited supply of houses and the favorable demographic situation, which supports sustainable demand for apartments.

Performance and Essential Materials are expected to remain relatively stable in the near future. However, growth in this segment may be limited by weak end-market demand and cheap imports from Asia in some product categories and regions.

The story continues

While the company waits for broader economic conditions to improve, it is taking steps to increase the profitability of its European operations by implementing structural cost reductions. Additionally, it invests in projects that increase the reliability and efficiency of its plants.

How have estimates changed since then?

It turns out that the fresh estimates have not changed over the last month.

VGM results

Westlake currently has a Weak Growth Score of D, although it lags slightly behind its Momentum Score of F. However, the stock is rated a C on the value side, ranking in the middle 20% in that range. investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Westlake carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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