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Westlake Chemical (NYSE:WLK) Q3 Earnings: What Can You Expect?

in EARNINGS/INVESTING IDEAS by

Westlake Chemical Corporation (NYSE:WLK) is scheduled to report Q3 earnings results before markets open for trading on November 3, 2020.

The company is expected to report earnings of $0.46/share on revenue of $1.901 billion. The consensus earnings per share (EPS) of $0.46/share is based on a poll of 9 analysts and represents a decline in eps of −63.1% over the same quarter last year, when the company reported earnings of $1.25/share.

The revenue forecast of $1.901 billion based on a poll of 9 analysts implies a year-over-year (YoY) decline in revenue of −8.0%. Last year the company reported $2.066 billion in revenue for the quarter.

Expected to report EPS contraction of −63.1% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,901.08 $2,066.00 −8.0%
EPS $0.46 $1.25 −63.1%

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, and missed expectations 3 quarters.

What are your expectations from Westlake Chemical Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.01 $0.11 1,392.5% Beat
Q1, 2020 $0.59 $0.65 10.6% Beat
Q4, 2019 $0.87 $0.37 −57.3% Missed
Q3, 2019 $1.03 $1.25 21.3% Beat
Q2, 2019 $0.83 $0.93 11.7% Beat
Q1, 2019 $1.26 $0.71 −43.5% Missed
Q4, 2018 $1.68 $1.02 −39.3% Missed
Q3, 2018 $2.14 $2.30 7.3% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $57.27 $57.78 0.9% Increase
May 4, 2020 $40.38 $42.75 5.9% Increase
February 18, 2020 $64.84 $63.05 −2.8% Decline
November 5, 2019 $68.35 $73.48 7.5% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.85, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.85 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Westlake Chemical Corporation is currently trading at $65.57/share, down −3.5% for the day. The company is trading at approximately 86.6% of its 52-week high of $75.65/share. The company’s stock price is up 13.5% since the last earnings report and down −6.4% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 47.43 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:WLK Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 21.50 and a forward P/E multiple of 39.41.

Westlake Chemical Corporation’s current share price also implies a price-to-book (P/B) multiple of 1.41. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $65.57
P/E Ratio 21.5x
P/E Ratio (Fwd) 39.4x
PEG Ratio −0.6
Total Debt / Total Capital 31.4%
Levered Free Cash Flow $676 million
EV / EBITDA 9.1x

Finbox

Westlake Chemical Corporation is a mid-cap stock with a market capitalization of $8.675 billion and a total enterprise value of $12.313 billion. The company operates in the Materials sector and the Chemicals industry.

Westlake Chemical Corporation, together with its subsidiaries, manufactures and markets basic chemicals, vinyls, polymers, and building products worldwide. It operates through two segments, Olefins and Vinyls. The Olefins segment offers polyethylene, styrene monomers, and various ethylene co-products, as well as sells propylene, crude butadiene, pyrolysis gasoline, and hydrogen products. The Vinyls segment provides specialty and commodity polyvinyl chloride (PVC), vinyl chloride monomers, ethylene dichloride, chlorine, caustic soda, chlorinated derivative, and ethylene products. This segment also manufactures and sells PVC compounds and building products fabricated from PVC, including residential siding, trim and moulding, pipe and fittings for various water, sewer and industrial applications, profiles for windows and doors, decking products, film for various inflatables, wall covering tapes, roofing applications, and composite roof tiles. Westlake Chemical Corporation offers its products to a range of customers, including chemical processors, plastics fabricators, small construction contractors, municipalities, and supply warehouses in various consumer and industrial markets, such as flexible and rigid packaging, automotive products, coatings, water treatment, refrigerants, and residential and commercial construction, as well as other durable and non-durable goods. The company was founded in 1986 and is headquartered in Houston, Texas. Westlake Chemical Corporation is a subsidiary of TTWF LP.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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