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Westlake Chemical Shares Up 12% This Month; RBC Upgrades To Outperform

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RBC Capital Markets upgraded shares of Westlake Chemical Corporation (NYSE: WLK) from Sector Perform to Outperform and increased its price objective from $47 to $59.

Analysts Arun Viswanathan and Daniel DiCicco listed six points to support the upgrade.

  • The AXLL merger is on track to close in September
  • Creating momentum for its chlor-alkali
  • Financial carefulness along with the strong management
  • Possible IRS resolutions.

The most important factor is that the analyst expects the near-term pricing momentum on polyethylene to likely add $0.05/lb for September. The last point is the ethane environment, which the analyst believes are good for the longer-term.

In their research note, RBC said, "We believe if producers continue to delay/cancel USGC ethylene projects over the next 4 years, it could help sustain higher ethane rejections, resulting in lower for longer ethane. Per our proprietary NGL consumption model, we estimate WLK has the highest leverage to ethane ($0.10/gal change in ethane prices is ~20% of EPS, relative to other players at 5-10%)."

The brokerage believes Westlake Chemical is a way to play based on the increasing PE prices in the near-term. The analyst expects the company to maximize its fresh assets so as to get the maximum $100 million synergy target.

The stock advanced $1.74, or 3.48 percent, to $52.40 on Tuesday.

Latest Ratings for WLK

Jan 2019NomuraDowngradesNeutralReduce
Jan 2019Bank of AmericaUpgradesUnderperformBuy
Oct 2018NomuraMaintainsNeutralNeutral

View More Analyst Ratings for WLK
View the Latest Analyst Ratings

Posted-In: RBC CapitalAnalyst Color Upgrades Price Target Analyst Ratings


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