Why Is Methanex (MEOH) Up 33.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Methanex (MEOH). Shares have added about 33.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Methanex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Methanex's Q1 Earnings Beat Estimates, Revenues Down Y/Y

Methanex posted profits (attributable to shareholders) of $23 million or 21 cents per share in the first quarter of 2020, down from $38 million or 50 cents per share in the year-ago quarter.

Adjusted earnings per share (barring one-time items) in the reported quarter were 10 cents, which surpassed the Zacks Consensus Estimate of 7 cents.

Revenues declined 17.4% year over year to $745 million in the quarter. The results were impacted by lower year-over-year methanol prices.

Adjusted EBITDA tumbled 28.9% year over year to $138 million.

Operational Highlights

Production in the quarter totaled 2,007,000 tons, up 11% year over year. Total sales volume was 2,788,000 tons, up 2.4% year over year.

Average realized price for methanol was $267 per ton in the quarter, down 19.3% from $331 in the prior-year quarter.

Financials

For the reported quarter, cash flow from operating activities was $142 million, down 33.3% year over year. The company had cash and cash equivalents of $823 million, up 188.7% year over year.

Outlook

Methanex expects demand for methanol to be lower in the second quarter on a sequential comparison basis due to the impacts of the coronavirus pandemic and a low oil price environment. As a result, the company anticipates financial results to be lower in the second quarter as compared to the first quarter. Notably, it stated that it cannot accurately forecast the degree of impact at this point of time due to uncertainties regarding the duration and extent of the coronavirus pandemic, and the low oil price environment.

Further, Methanex deferred roughly $500 million in capital expenditure on its Geismar 3 project for up to 18 months due to substantial uncertainty, arising from the coronavirus pandemic.

Moreover, the company reduced maintenance capital expenditure for 2020 by $30 million. It also reduced the quarterly dividend by 90%, representing roughly $100 million in annualized cash savings.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -48.86% due to these changes.

VGM Scores

Currently, Methanex has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Methanex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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