Price Target Increase#
Morgan Stanley has raised its price target for Westlake Chemical stock (NYSE: WLK) from $80 to $115, while keeping an Equalweight rating. The stock is currently trading at $114.87, reflecting a significant increase of 74% over the past six months.
Reasons for Optimism#
The investment firm highlighted improvements in Westlake's Performance and Essential Materials segment, largely due to supply disruptions from Iran. However, these gains are somewhat countered by short-term cost challenges in the Housing and Infrastructure Products segment. Morgan Stanley now anticipates first-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) of $350 million, an increase from its previous estimate of $310 million and above the consensus estimate of $327 million. Six analysts have also raised their earnings forecasts for the upcoming period.
Segment Performance#
The Performance and Essential Materials segment has benefited from increased exports of PVC (polyvinyl chloride) and favorable pricing for polyethylene, a type of plastic. Morgan Stanley has adjusted its first-quarter EBITDA estimate for this segment to $144 million, up from $104 million, surpassing the consensus estimate of $110 million. The Housing and Infrastructure Products segment's EBITDA estimate remains at $197 million, slightly below the consensus of $200 million.
Future Projections#
Looking ahead, Morgan Stanley projects 2026 EBITDA for Westlake at $2.362 billion, a significant increase from the prior estimate of $1.475 billion and above the consensus of $2.0 billion. The positive outlook is attributed to lower-than-expected costs for ethane and natural gas, as well as improved polyethylene pricing. However, the stock's performance may be more influenced by the ongoing situation in Iran than by the company's quarterly results.
Recent Developments#
In other news, Westlake Corporation's epoxy plant in Deer Park, Texas, has received the International Sustainability & Carbon Certification (ISCC) PLUS, applicable to various epoxy products in construction and automotive industries. Additionally, Jonathan H. Baksht has been appointed as the new Senior Vice President and Chief Financial Officer, succeeding M. Steven Bender, who will transition to a Special Advisor role. RBC Capital has reiterated its Outperform rating on Westlake Chemical, maintaining a price target of $145.00.