On Mar 24, we issued an updated research report on leading methanol producer Methanex Corporation MEOH.
Methanex's earnings for the fourth quarter of 2015 dropped year over year and missed the Zacks Consensus Estimate. Revenues fell by double-digits on lower methanol pricing and trailed expectations.
Methanex is exposed to volatility in methanol pricing. Lower oil prices have contributed to the decline in methanol prices. The company’s average realized prices slid around 26% year over year in 2015. Average realized prices also tumbled roughly 29% in the fourth quarter.
Although pricing has somewhat stabilized of late, it is expected to remain under pressure in the short haul. The company expects methanol prices to be lower on a sequential comparison basis in first-quarter 2016, leading to an expected decline in margins in the quarter.
Methanex’s production has also been crippled by shortage of natural gas supplies in various regions. Restricted supply of natural gas continues to affect its operations in Chile, Trinidad and Egypt. Methanex continues to see gas curtailments in Trinidad as evidenced in the fourth quarter. The Trinidad operation experienced gas restriction of around 15% in the fourth quarter and Methanex sees similar curtailments in 2016. Short-term natural gas supply issues are expected to continue across the company’s Trinidad and Egypt operations.
Methanex’s business is also subject to the risks of operating methanol production facilities including longer-than-anticipated planned maintenance activities and unforeseen equipment breakdowns. A prolonged plant shutdown at any of the major facilities could have an unfavorable impact on results of operations and the financial condition.
Methanex is a Zacks Rank #5 (Strong Sell) stock.
Other Stocks to Consider
Some better-ranked companies in the diversified chemical space include Arkema S.A. ARKAY, Sinopec Shanghai Petrochemical Co. Ltd. SHI and Koninklijke DSM N.V. RDSMY. While both Arkema and Sinopec Shanghai sport a Zacks Rank #1 (Strong Buy), Koninklijke DSM carries a Zacks Rank #2 (Buy).
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