Why Methanex Stock Triumphed While the Market Tanked Today
Key Points
It also launched a new share repurchase program.
The company is authorized to buy up to 5% of its outstanding shares.
- 10 stocks we like better than Methanex ›
Friday was a crushing day for investors in certain industries, but chemicals wasn't necessarily one of them. Case in point: Methanex (NASDAQ:MEOH), which recorded a double-digit percentage gain thanks to a solid third-quarter earnings report. Fueled by the good sentiment engendered by that report, plus a new share repurchase program announced by the specialty chemical company, Methanex's shares gained more than 14% across that trading session.
Making the most of the methanol supply
For the period, Methanex's revenue grew by a very robust 50% to $1.39 billion. Since the company's production of its near-namesake product, methanol, declined by 3% (to 2.1 million metric tonnes), much of the top-line jump was due to a sharp increase in selling prices. The company's average realized price leaped almost 48% higher to $510 per tonne. That was largely attributable to supply disruptions in the Middle East, which constricted supply and lifted prices.
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This also affected profitability, with net income not under generally accepted accounting principles (non-GAAP, or adjusted) rising to $284 million ($3.69 per share) from a mere $5 million in the year-ago quarter.
Both figures well exceeded the average analyst estimates. The consensus pundit projection for revenue was $1.29 billion, and for adjusted earnings per share (EPS) it was $2.82.
High and persistent
Such vast improvements in the fundamentals have left space for share repurchases. Separately, Methanex announced that its board of directors has authorized it to buy back as much as 5% of its outstanding common shares, or up to nearly 3.9 million. The initiative begins next Wednesday, Nov. 4, and ends on Nov. 3, 2027.
It's always satisfying when a company takes advantage of a hole in its market, and Methanex has clearly pounced on the current opportunity. It's guiding for a price range of $525 to $550 per tonne in the October to November stretch. While this level puts quite a strain on customer budgets, there's little indication that the conflict in the Middle East will ease soon; therefore, such elevated pricing could persist.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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