Westlake (WLK) First Quarter Earnings and Revenue Best Estimates – May 6, 2022

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Westlake Corporation (WLK Free Report) posted earnings of $756 million or $5.83 per share in the first quarter of 2022, compared with $242 million or 1.87 cents per share in the year-ago quarter. Net income beat Zacks’ consensus estimate of $4.70 per share.

Sales climbed about 72% year over year to $4,056 million in the quarter. It also topped Zacks’ consensus estimate of $3,440.2 million. Sales were boosted by higher selling prices across most of the company’s businesses. Westlake also benefited from contributions from new businesses acquired in the second half of 2021 and early this year.

Westlake benefited from continued strength in the residential construction market in strong repair and renovation markets, resulting in strong demand and prices for polyvinyl chloride (PVC) resin and increased demand in its housing and infrastructure products unit. The company’s Performance and Essential Materials business was also marked by strength in polyethylene for the packaging and consumer markets.

Segment Highlights

Sales in the Performance and Essential Materials segment increased approximately 63% year-over-year to $2,832 million in the current quarter. Segment operating profit was $879 million, up about three times year-on-year. The increase was led by higher prices for the segment’s main products due to strong demand in the manufacturing, packaging and construction markets.

The housing and infrastructure products segment generated sales of $1,224 million, nearly double the year-ago quarter. Segment operating profit was $185 million, up about 161% from a year ago. The increase was mainly due to strong housing and renovation activity which led to healthy demand and price increases for all products in the segment.

Financial situation

Westlake ended the quarter with cash and cash equivalents of $1,055 million, down about 24% year-over-year. Long-term debt was $4,902 million, up about 38%.

Cash flow from operations was $700 million in the current quarter, up about 164% year-over-year.

Outlook

The company said market conditions remained favorable amid volatility driven by economic and geopolitical factors that could impact its business. Westlake remains confident in its business fundamentals, which should allow it to generate more resilient earnings and cash flow in various economic environments.

Westlake reaffirmed its capital expenditure guidance in the range of $750 million to $850 million for 2022.

Zacks Ranking and Other Stocks to Consider

Westlake currently carries a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks to consider in base materials include Steel Dynamics, Inc. (STLD free report), Metal trading company (CMC free report) and AdvanSix Inc. (AT SIX free report).

Steel Dynamics, sporting a No. 1 Zacks rank, has an expected profit growth rate of 18.5% for the current year. The Zacks consensus estimate for STLD’s current-year earnings has been revised up 32.5% in the past 60 days. You can see the full list of today’s Zacks #1 Rank stocks here.

Steel Dynamics has beaten Zacks’ consensus estimate for earnings in each of the past four quarters, averaging around 2.5%. STLD gained about 29% in one year.

Commercial Metals, carrying a No. 1 Zacks rank, has an expected profit growth rate of 78.2% for the current fiscal year. The Zacks consensus estimate for CMC’s current-year earnings has been revised up 31.9% in the past 60 days.

Commercial Metals has beaten the Zacks consensus estimate for earnings in three of the past four quarters while missing once. It has a four-quarter earnings surprise of around 16%, on average. CMC gained about 23% in one year.

AdvanSix, carrying a No. 1 Zacks rank, has an expected earnings growth rate of 63.4% for the current year. ASIX’s consensus estimate for current-year earnings has been revised up 31.9% in the past 60 days.

AdvanSix has beaten the Zacks consensus estimate for earnings in three of the past four quarters while missing once. It has a surprise on earnings for the last four quarters of about 23.6% on average. ASIX is up around 48% in one year.

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