Westlake operates in two main businesses: housing and infrastructure products (HIP), which provides materials for homebuilding and infrastructure projects; and performance and essential materials (PEM), which produces chemicals used to make products like car interiors and PVC pipes. While HIP is thriving, PEM has struggled with lower prices for key materials.

Houston-based Westlake, which is No.326 on the Fortune 500, reported Q4 revenue of $2.84 billion, up slightly from a year ago but below Wall Street expectations, due to weaker sales in its chemicals business. The HIP segment continued its momentum, as sales slightly exceeded expectations with a 4% year-over-year rise to $981 million. But the PEM segment saw a 1% decline in sales to $1.86 billion, about 5% less than forecast.

The HIP sales rise marked the fifth consecutive annual increase. CEO Jean-Marc Gilson emphasized its stability, calling HIP “a very stable foundation for the company with significant growth potential.”

“2024 was another record year for our HIP segment, which did an amazing job growing sales and earnings,” Gilson said in a call with Wall Street analysts.

“Regionally, North America was a bright spot for us during the fourth quarter, as demand remained relatively strong in both segments.”

Despite strong results, some analysts raised concerns about potential housing headwinds, including the Federal Reserve’s monetary policy. Westlake executives acknowledged these uncertainties but maintained that the long-term housing supply gap in the U.S. will keep demand strong.

“Housing-industry consultants forecast that housing starts for 2025 will be similar to 2024 at 1.3 million,” said CFO Steve Bender. “The depth and breadth of our portfolio of building products and broad geographical reach across North America provide a platform for continued growth in our HIP segment in these market conditions.”

Bank analysts noted the company’s mixed performance. BMO Capital Markets wrote in a note after the earnings, “WLK’s 4Q results missed earnings driven primarily by its commodity-exposed PEM segment.” BMO analysts said Westlake’s housing products business continued to perform well and has room to grow, but a full rebound in home construction could take time.

PEM posted a loss from operations of $41 million in the fourth quarter, weighed down by lower pricing for key materials like chlorine, PVC resin, and polyethylene. But Gilson sees a rebound ahead.

“PEM can be seen a little bit in a trough situation right now,” he said. “We have a real cost advantage being where we are situated… As the business bounces back, you will see [it]…provide really strong cash flow and Ebitda generation in the future.”

Half the business for free

Despite PEM’s weak performance, Westlake execs say the market is undervaluing Westlake’s overall business. Bender noted that investors today are effectively “getting the PEM side of the business, frankly, for free,” as Westlake’s valuation remains lower than many of its chemical-industry peers.

“As you’ve seen the very strong performance in our business not only this year in HIP, but over the last five years… I think the market is just, frankly, undervaluing the entire enterprise,” Bender said.

For 2025, Westlake is projecting revenue in its HIP segment to range between $4.4 billion and $4.6 billion.

“We are optimistic on the outlook for our HIP segment, underpinned by the need to expand the supply of residential housing in the U.S. after over 15 years of under-building to support population growth and resulting housing demand,” Gilson said in the company’s earnings release.

Since the earnings report, shares of Westlake shares have risen 2%, to around $102.