5 Reasons That Make Methanex (MEOH) Stock A Solid Choice Now
Zacks Investment Research | Nov 15, 2018 06:44AM ET
Methanex Corporation's (NASDAQ:MEOH) stock looks promising at the moment. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let’s take a look into the factors that make this chemical company an intriguing choice for investors right now.
What Makes MEOH an Attractive Pick?
Solid Rank & VGM Score: Methanex currently has a Zacks Rank #1 (Strong Buy) and a industry over a year. The company’s shares have gained around 20.8% over this period, compared with roughly 19.1% decline recorded by the industry. Strong demand and pricing fundamentals for methanol have contributed to the rally in Methanex’s shares.
Healthy Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for Methanex is currently pegged at $7.71, reflecting an expected year-over-year growth of 63.7%. Moreover, earnings are expected to register a 18.2% growth in fourth-quarter 2018. The company also has an expected long-term earnings per share growth of 15%, higher than the industry average of 12.4%.
Superior Return on Equity (ROE): Methanex’s ROE of 34.3%, as compared with the industry average of 10.5%, manifests the company’s efficiency in utilizing shareholder’s funds.
Upbeat Prospects: Methanex saw its profits shoot up roughly four-fold year over year to $128 million or $1.61 per share in the third quarter of 2018. Revenues also increased roughly 45% year over year to $1,044 million in the quarter. The company gained from higher methanol prices and demand in the quarter.
Methanex, in its third-quarter call, noted that its outlook for the fourth quarter is positive. The company expects its production level to be higher in the fourth quarter vis-à-vis the third. The company also envisions its adjusted EBITDA to be higher sequentially in the fourth quarter.
Methanex is benefiting from strong demand and prices for methanol. Demand has been driven by both traditional derivatives and energy-related applications in Asia, particularly in China. Per the company, global demand for methanol increased 4% year over year in the third quarter.
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Moreover, higher methanol prices are boosting the company’s revenues and margins. In the third quarter, the company’s average realized prices for methanol climbed roughly 35% year over year.
Methanex also remains on track with its plans of capitalizing on near-term growth opportunities in Chile. The company, last month, completed the restart of its Chile IV plant and produced first methanol from the 0.8-million ton plant that has been idle since 2007. The Argentine Government has also granted permits for export of natural gas from Argentina to Chile. Methanex has started receiving natural gas from Argentina.
With a committed revolving credit facility, strong balance sheet and healthy cash generation capability, the company believes that it is well positioned to meet its financial commitments, execute growth opportunities and return excess cash to shareholders through dividends and share repurchases.
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