Why Westlake Chemical (WLK) Stock Is Gaining Today

NEW YORK (TheStreet) -- Westlake Chemical (WLK) stock is climbing Tuesday after the company announced it is spinning off a separate MLP subsidiary responsible for ethylene production.

By early afternoon, shares had spiked 11.6% to $71.65.

The company said one of its wholly-owned subsidiaries, Westlake Chemical Partners, had filed with the SEC in relation to its proposed IPO of common units.

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"Chemical Partners is a Delaware limited partnership recently formed by Westlake to operate, acquire and develop ethylene production facilities and related assets," the company said in a statement.

The number of units on offer and their price range have not yet been determined. 

Barclays Capital and UBS Securities will act as joint book-running managers for the offering.

TheStreet Ratings team rates WESTLAKE CHEMICAL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WESTLAKE CHEMICAL CORP (WLK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WLK's revenue growth has slightly outpaced the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 18.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.79, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Chemicals industry and the overall market, WESTLAKE CHEMICAL CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Powered by its strong earnings growth of 78.87% and other important driving factors, this stock has surged by 52.70% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WLK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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