On Friday, UBS analyst Joshua Spector upgraded shares of Westlake Chemical (NYSE: NYSE:WLK) from Neutral to Buy, setting a price target of $144.00. Spector's upgrade comes with a positive outlook on the company's earnings and valuation, suggesting that they are currently near a low point, presenting a favorable opportunity for investment.
According to the UBS analyst, the timing is opportune for entering Westlake Chemical's stock, especially with potential positive shifts in macroeconomic data anticipated later in the year. He noted that Westlake's key products, PVC and caustic, are well-positioned in the market due to a slower pace of capacity additions and expected near-term increases in utilization rates.
The analyst also highlighted the growth of Westlake's Housing & Infrastructure segment (HIP), which he believes offers beneficial exposure to a potential recovery in the U.S. housing market. Despite the market still being structurally underbuilt, the HIP segment has exhibited higher growth and margins than previously anticipated.
Spector's analysis suggests that the current stock price does not fully reflect the company's prospects. He pointed out that the stock is trading at approximately 6.5 times UBS's estimated 2025 EBITDA, which is below the midpoint for what is typical during low earnings periods. This assessment led to the conclusion that the market has not yet priced in the potential of Westlake Chemical's stock, justifying the upgrade to a Buy rating.
In other recent news, Westlake Chemical Corporation has been a focal point of several analyst adjustments. Piper Sandler reduced their price target for the company to $135, while maintaining an Overweight rating. This decision was based on anticipated changes in cyclical earnings.
Meanwhile, Citi upgraded Westlake Chemical from Neutral to Buy, noting the firm's strong balance sheet. BMO Capital Markets and RBC Capital Markets also adjusted their price targets for the company, citing its potential for leveraging its strong balance sheet for potential mergers and acquisitions.
Westlake Chemical reported Q3 earnings with net sales of $3.1 billion and net income of $183 million, even amid operational challenges and adverse weather conditions. The company also declared a regular dividend of $0.525 per share for the third quarter of 2024, continuing its practice of providing returns to shareholders.
The company's strategic partnerships within the building sector and potential for bolt-on mergers and acquisitions are seen as contributing factors to its future performance.
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