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BofA Securities lowered its price target on Westlake Chemical (NYSE:WLK) stock to $84.00 from $90.00 on Wednesday while maintaining a Buy rating following the company’s decision to close operations at its Pernis, Netherlands facility. The stock, currently trading at $72.39, has declined over 35% year-to-date. According to InvestingPro analysis, Westlake appears undervalued at current levels, with analysts setting targets ranging from $76 to $101.
Westlake announced Tuesday morning it would shut down its entire liquid epoxy resin and Bisphenol A production at the Pernis site. This closure follows the company’s earlier 2024 announcement regarding the shutdown of allyl chloride and epi operations at the same location.
The chemical manufacturer will now rely solely on its Deer Park, Texas assets for BPA and liquid epoxy resin production, with BofA noting these facilities "are said to still be profitable." The closure decision comes amid broader challenges in the epoxy market and highlights difficulties facing European chemical operations.
BofA Securities described the development as "unsurprising" given industry conditions but called it a "rare misstep" for Westlake’s management team. The firm estimated that cumulative EBITDA generation from Westlake’s $1,200 million Hexion acquisition in 2022 is "near zero dollars."
The research firm characterized the closure as an important step in "resetting the business going forward" and establishing a "trough earnings profile" for the chemical company.
In other recent news, Westlake Chemical announced the closure of its Pernis, Netherlands plant, which will affect its liquid epoxy resin and bisphenol A operations. This decision is part of an expanded strategy to reduce its European footprint amid challenging macroeconomic conditions. In response to these developments, BMO Capital Markets maintained a Market Perform rating on the company. Meanwhile, CFRA downgraded Westlake Chemical from Hold to Sell, citing weak demand and overcapacity issues, particularly in residential construction. The firm’s financial performance has shown signs of strain, with free cash flow and earnings per share taking a hit. Mizuho (NYSE:MFG) also adjusted its outlook, lowering the stock price target to $82, while maintaining an Outperform rating due to lower export volumes and tariff uncertainties. Truist Securities revised its price target to $92, retaining a Buy rating, noting challenges in the Polyethylene and Polyvinyl Chloride markets. UBS adjusted its price target to $101, maintaining a Buy rating, and highlighted potential benefits from the company’s Housing & Infrastructure segment despite near-term challenges.
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