Goldman Sachs Raises Price Target on Westlake Chemical (WLK)

Goldman Sachs is out with a research report this morning, where it reiterates its Sell rating on Westlake Chemical Corp. WLK; it also raised its price target on the stock to $27.00, from $20.00. The GS analysts said that they have updated their estimates given that they believe the ethylene cycle will trough in the next few months. Though margins still have some pressure to the downside, the analysts believe they will not decline as significantly as previously estimated. Goldman cited competitor outages, delays in incremental capacity, and a substantial reduction in feedstock costs, which could and should lead to higher earnings for Westlake Chemicals. As for valuation, the analysts remarked, “Our $27 (from $20) 12-month price target is based on WLK's 5-year average EV/EBITDA multiple of 6.0X. Previously, we had used a lower multiple of 5.5X to reflect the overhang of new industry capacity.”