Balanced View on Methanex - Analyst Blog
February 21 2013 - 10:50AM
Zacks
We have reaffirmed our Neutral
recommendation on leading methanol producer Methanex
Corporation (MEOH). While the company is poised to gain
from capacity expansion and its Geismar methanol project, it
remains exposed to natural gas curtailment issues and weakness
across end markets.
Why Retained?
Methanex had a drab fourth-quarter of 2012 with both revenues and
adjusted earnings missing the Zacks Consensus Estimates. The
company turned to loss on a reported basis, hit by a hefty asset
impairment charge. Operating rates were lower-than-expected across
a number of plants.
Methanex feels that the methanol industry and its pricing
environment appear attractive in the longer term as global demand
is expected to surpass new capacity additions. Despite the global
economic weakness, demand for methanol remains healthy driven by
energy-related applications in Asia, particularly in China.
The company’s healthy financial position, strong global supply
network and competitive-cost position is expected to strengthen its
position as the global leader in the methanol industry and enable
it to continue to deliver incremental returns to shareholders.
Methanex has taken up a number of steps to boost capacity. We are
also optimistic about its Geismar, La., project which is expected
to create significant value for its shareholders and meaningfully
contribute in cash generation.
However, Methanex may continue to face headwinds due to gas supply
constraints and weak spending across its end markets. Restricted
supply of natural gas affected its operations in Chile, Trinidad
and Egypt in the fourth quarter. Although Methanex is trying to
resolve the issue, it expects the problem to continue in the near
term.
Methanex currently carries a short-term (1 to 3 months) Zacks Rank
#3 (Hold).
Other Stocks to Consider
Other companies in the chemical industry worth considering are
Arkema S.A. (ARKAY), BASF SE
(BASFY) and PetroLogistics LP (PDH). All of them
hold a Zacks Rank #1 (Strong Buy).
(ARKAY): ETF Research Reports
BASF SE (BASFY): Free Stock Analysis Report
METHANEX CORP (MEOH): Free Stock Analysis Report
PETROLOGISTICS (PDH): Free Stock Analysis Report
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