Value Play: Westlake Chemical (WLK)

Westlake Chemical Corporation (WLK) saw sales jump 42% in the second quarter as the global recovery continued.

Westlake Chemical manufactures petrochemicals and plastics in 15 facilities in North America and China.

Westlake’s products include ethylene, polyethylene, propylene, caustic, VCM, pipes, windows and fences. It is the building blocks of many regular household items from tires to plastic wrap on your food.

Dividend Raised Again

On Aug 23, the company announced it would raise the dividend by 10%, or 0.6 cents, to 6.35 cents per share.

It was the 24th consecutive quarterly dividend. Westlake has paid a dividend every quarter since going public in Aug 2004.

This is a yield of 0.9%.

Zacks Consensus Estimates Move Higher

1 estimate out of 6 has been revised higher for 2010 in the last week which has pushed the 2010 Zacks Consensus Estimate up by 14.6% to $2.04 from $1.78 per share.

Analysts expect earnings growth of 155%. However, there is some doubt about 2011 as earnings are expected to slide by 6%.

2 estimates have also moved higher for 2011 in the last week but the 2011 estimate has jumped up to just $1.91 from $1.75 per share.

Westlake is scheduled to report third quarter earnings on Nov 9.

Westlake Surprised By 72% in the Second Quarter

On Aug 3, Westlake reported its second quarter results and blew by the Zacks Consensus Estimate by 36 cents. Earnings per share were 86 cents compared to just 26 cents in the year ago period.

Sales soared 42% to $818.4 million from $574.9 million as sales prices rose for most of the company’s major products.

The Olefins segment margins also continued to improve in the quarter as it was boosted by strong domestic and export demand for polyethylene and lower feedstock costs.

WLK Barely a Value Stock

Westlake just barely qualifies to be a value stock with a forward P/E of 14.4. This is in line with its peers, however.

But it has some other attractive valuations including a price-to-sales ratio of 0.7 and a price-to-book ratio of 1.4, both of which are well within the value parameters.

Westlake is a Zacks #1 Rank (strong buy) stock.

WESTLAKE CHEM (WLK): Free Stock Analysis Report

About Tracey Ryniec 60 Articles

Affiliation: Zacks Investment Research

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

Visit: Zacks Investment Research

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