A month has gone by since the last earnings report for Westlake Chemical (WLK). Shares have lost about 8.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Westlake due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Westlake's Q3 Earnings and Revenues Miss Estimates on Lower Volumes

Westlake logged a third-quarter 2024 profit of $108 million or 83 cents per share, down from $285 million or $2.20 per share in the year-ago quarter. Barring one-time items, adjusted earnings for the reported quarter came in at $1.41 per share. The bottom line missed the Zacks Consensus Estimate of $2.12.

Sales for the reported quarter were $3,117 million, flat year over year. It lagged the Zacks Consensus Estimate of $3,230.6 million. Sales declined 3% sequentially as a 4% decline in sales volumes more than offset a 1% increase in average sales prices.

Segment Highlights

Sales in the Performance and Essential Materials (PEM) segment went up around 2% year over year to $2,019 million in the reported quarter. It was above our estimate of $2,017.8 million. PEM sales volume fell 1% sequentially while average sales price rose 1%.

The HIPsegment generated sales of $1,098 million, down around 4% from the year-ago quarter. The figure was below our estimate of $1,211.8 million. HIP sales volumes were hurt by weaker North American residential construction activity and weather disruptions.

Financial Position

As of Sept. 30, 2024, cash and cash equivalents totaled $2.9 billion, while total debt was $4.6 billion.

In the third quarter, net cash provided by operating activities was $474 million, with capital expenditures of $220 million.

Outlook

Per Westlake, the pace of the recovery from the recent downturn in global industrial and manufacturing activities remains uneven. Nevertheless, the recent monetary and fiscal stimulus have the potential to accelerate the pace of the macroeconomic recovery. Westlake will remain focused on developing and commercializing innovative new products to help its customers meet their needs, improving the profitability of its plants and creating long-term shareholder value.




 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -17.82% due to these changes.

VGM Scores

Currently, Westlake has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Westlake has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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