The Zacks Chemicals Diversified industry has recovered after reeling under the effects of the coronavirus fallout. A strong revival in demand in major end markets from the pandemic-led lows and an upturn in manufacturing and industrial activities globally have put the wind back in the sails of the industry.
Dow Inc. DOW, Albemarle Corporation ALB, Huntsman Corporation HUN and The Chemours Company CC are well placed to benefit from the rebound in demand. Strategic measures, including reduction of operating costs, are also helping these companies to navigate a still-challenging environment.
About the Industry
The Zacks Chemicals Diversified industry consists of manufacturers of basic chemicals, plastics, specialty chemicals and agricultural chemicals. Companies in this space serve a host of end markets such as automotive, building & construction, transportation, electronics, aerospace and agriculture. Basic chemicals are produced in large quantities, and include petrochemicals and intermediates (such as ethylene, propylene and benzene), polymers (including plastic resins such as polyethylene, polypropylene and polyvinyl chloride), and inorganic chemicals (such as chlorine, caustic soda and titanium dioxide). Specialty chemicals that include catalysts, specialty polymers and coating additives are used in specific fields based on their performance. Agricultural chemicals include herbicides, fungicides and insecticides that are used to protect crops from disease, pests and weeds.
What's Shaping the Future of the Chemicals Diversified Industry?
Strong End-Market Demand Buoy Prospects: Lockdowns and restrictions by governments around the world, in response to the pandemic, halted industrial activities through the first half of 2020 and gutted demand for chemicals in the key end-use markets, including automotive, construction and electronics. However, chemical demand started to pick up from the third quarter of 2020 on the return of global economic activities. The uptick in demand is being driven by a rebound in manufacturing and industrial activities globally. The automotive industry has rebounded, following the virus-led slump riding on pent-up demand and the shift toward private transportation. Despite the semiconductor crunch still hurting production, diversified chemical companies are seeing firm demand from the automotive market. The construction sector has also bounced back on the resumption of many projects, with strength particularly being witnessed in residential construction. A recovery in demand is also being witnessed across the aerospace and energy markets. An upturn in drilling activities on the back of a surge in oil prices has led to an uptick in demand in the energy space. As the major end-use markets gain further strength, demand for chemicals is expected to go up, thereby driving sales volumes and top lines of diversified chemical companies.
Strategic Actions to Drive Results: The companies in this space are taking a host of strategic measures, including cost-cutting and productivity improvement, operational efficiency improvement and actions to strengthen the balance sheet and boost cash flows. In particular, the industry participants are aggressively implementing actions to bring down costs, which include the reduction of discretionary spending and traveling expenses. The industry players are also raising selling prices to counter cost inflation. These moves are likely to help the industry in sustaining margins amid the prevailing challenges.
Higher Input Costs Pose Margin Headwinds: The industry players are exposed to cost pressure associated with raw materials resulting from short supply. These companies also face challenges arising from higher supply chain and logistics costs. The pandemic-driven disruptions in the supply chain have pushed up the prices of inputs. Russia's invasion of Ukraine and new government-mandated lockdowns in China have also put more pressure on the already strained global supply chain. The impacts of supply and logistic bottlenecks are expected to continue over the short term. Higher raw material and logistics costs are, thus, likely to drag the margins of diversified chemical companies.
Story continues
Zacks Industry Rank Indicates Upbeat Prospects
The Zacks Chemicals Diversified industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #97, which places it at the top 38% of more than 250 Zacks industries.
The groups Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates a bright near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, lets take a look at the industrys recent stock-market performance and valuation picture.
Industry Underperforms S&P 500
The Zacks Chemicals Diversified industry has underperformed the Zacks S&P 500 composite over the past year while outperforming the broader Zacks Basic Materials sector over the same period.
The industry has lost 8.1% over this period compared with the S&P 500s decline of 6.1% and the broader sectors decline of 11.3%.
Industry's Current Valuation
On the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing chemical stocks, the industry is currently trading at 6.63X, below the S&P 500s 12.38X and above the sectors 5.97X.
Over the past five years, the industry has traded as high as 13.28X, as low as 5.27X and at the median of 8.03, as the chart below shows.
4 Chemicals Diversified Stocks to Keep a Close Eye on
Albemarle: North Carolina-based Albemarle is a premier specialty chemicals company with leading positions in attractive end markets globally. It is benefiting from higher volumes in its lithium business on continued recovery in global economic activities. Healthy customer orders and plant productivity improvements are supporting volumes. Higher lithium prices due to tight market conditions are also supporting its performance. Its bromine business is also gaining from higher demand, a rebound in certain end markets, higher pricing and cost-saving actions. ALB is seeing strong demand for flame retardants. The company is also strategically executing its projects aimed at boosting its global lithium derivative capacity. It remains focused on investing in high-return projects to drive productivity. Albemarle is also benefiting from cost-saving and productivity initiatives.
Albemarle, currently sporting a Zacks Rank #1 (Strong Buy), has expected earnings growth of 175% for the current year. The Zacks Consensus Estimate for ALBs current-year earnings has been revised 85.8% upward over the last 60 days. The company has also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22.5%. You can see the complete list of todays Zacks #1 Rank stocks here.
Dow: Based in Michigan, Dow is a material science company, providing a world-class portfolio of advanced, sustainable and leading-edge products. It is benefiting from cost synergy savings and productivity initiatives along with its investment in high-return projects. The company focuses on maintaining cost and operational discipline. Its restructuring program is also expected to deliver margin benefits. DOW also remains committed to investing in attractive areas through highly accretive projects. It is also benefiting from higher demand for its materials across a number of markets, including personal care, electronics, construction, healthcare and packaging.
Dow currently carries a Zacks Rank #2 (Buy). The consensus estimate for current-year earnings has been revised 18.8% upward over the last 60 days. DOW has also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 9.2%.
Huntsman: Texas-based Huntsman is a leading manufacturer of differentiated and commodity chemical products. Huntsman remains focused on growing its downstream specialty and formulation businesses. The company's Polyurethanes segment is well positioned for strong upside in the long term on the back of its focus on ramping up its high-value differentiated downstream portfolio. HUN should also gain from significant synergies of acquisitions. Its strong liquidity and balance sheet leverage gives it adequate flexibility to continue to develop and expand its core businesses through acquisitions and internal investments.
Huntsman, carrying a Zacks Rank #2, has an expected earnings growth rate of 22.6% for the current year. The consensus estimate for HUN's current-year earnings has been revised 8.5% upward over the last 60 days. The company beat the Zacks Consensus Estimate for earnings in each of the last four quarters at an average of 12.6%.
Chemours: Based in Delaware, Chemours is a leading provider of performance chemicals. Chemours is benefiting from a rebound in demand from the coronavirus-led downturn, strong execution and its cost-cutting actions. It is witnessing increasing adoption of the Opteon platform. Demand for Opteon remains strong in mobile and stationary applications. CCs cost-reduction program along with its productivity and operational improvement actions across its businesses are also expected to support margins.
Chemours, a Zacks Rank #2 stock, has expected earnings growth of 30.5% for the current year. The Zacks Consensus Estimate for earnings for the current year has been revised 15.2% upward over the last 60 days. CC beat the Zacks Consensus Estimate in three of the trailing four quarters. In this time frame, it has delivered an average earnings surprise of roughly 28.7%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dow Inc. (DOW) : Free Stock Analysis Report Albemarle Corporation (ALB) : Free Stock Analysis Report Huntsman Corporation (HUN) : Free Stock Analysis Report The Chemours Company (CC) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
See the article here:
4 Stocks to Buy From the Promising Diversified Chemical Industry - Yahoo Finance
- ONS t-shirts from Zazzle [Last Updated On: August 17th, 2024] [Originally Added On: April 6th, 2010]
- Scientists Embrace Openness Article in Science Careers [Last Updated On: August 17th, 2024] [Originally Added On: April 12th, 2010]
- ONS Books Wiki [Last Updated On: August 17th, 2024] [Originally Added On: April 20th, 2010]
- Reaction Attempts Book Edition 1 and UsefulChem Archive [Last Updated On: August 17th, 2024] [Originally Added On: April 28th, 2010]
- NMR integration web service expanded [Last Updated On: August 17th, 2024] [Originally Added On: May 1st, 2010]
- The Synaptic Leap Experiments on Reaction Attempts [Last Updated On: August 17th, 2024] [Originally Added On: May 3rd, 2010]
- ChemSpider SyntheticPages [Last Updated On: August 17th, 2024] [Originally Added On: May 4th, 2010]
- The Scientist Article on Electronic Lab Notebooks [Last Updated On: August 17th, 2024] [Originally Added On: May 7th, 2010]
- OpenSciNY Open Notebook Science Talk [Last Updated On: August 17th, 2024] [Originally Added On: May 17th, 2010]
- Setac Europe 2010: ‘It’ll all come out in the wash’ [Last Updated On: August 17th, 2024] [Originally Added On: June 3rd, 2010]
- ASMS: Forget Vioxx, eat chocolate? [Last Updated On: August 17th, 2024] [Originally Added On: June 3rd, 2010]
- Smoking could be good for you – if you get the message [Last Updated On: August 17th, 2024] [Originally Added On: June 3rd, 2010]
- Chemistry World's round-up of money and molecules [Last Updated On: August 17th, 2024] [Originally Added On: June 3rd, 2010]
- ASMS: Anthrax attacks [Last Updated On: August 17th, 2024] [Originally Added On: June 3rd, 2010]
- This week on Chemistry World… [Last Updated On: August 17th, 2024] [Originally Added On: June 3rd, 2010]
- Use of ONS to protect Open Research: the case of the Ugi approach to Praziquantel [Last Updated On: August 17th, 2024] [Originally Added On: June 3rd, 2010]
- IGERT NSF panel on Digital Science [Last Updated On: August 17th, 2024] [Originally Added On: June 8th, 2010]
- Reaction Attempts Explorer [Last Updated On: August 17th, 2024] [Originally Added On: June 25th, 2010]
- Methanol Solubility Prediction Model 4 for Ugi reactions in the literature [Last Updated On: August 17th, 2024] [Originally Added On: July 8th, 2010]
- Secrecy in Astronomy and the Open Science Ratchet [Last Updated On: August 17th, 2024] [Originally Added On: July 12th, 2010]
- Resveratrol Thesis on Reaction Attempts [Last Updated On: August 17th, 2024] [Originally Added On: July 22nd, 2010]
- General Transparent Solubility Prediction using Abraham Descriptors [Last Updated On: August 17th, 2024] [Originally Added On: July 25th, 2010]
- Berkeley Open Science Summit 2010 Notes [Last Updated On: August 17th, 2024] [Originally Added On: August 2nd, 2010]
- The Reaction Attempts Solvent Selector [Last Updated On: August 17th, 2024] [Originally Added On: August 8th, 2010]
- Green Solvent Metric on Solvent Predictor [Last Updated On: August 17th, 2024] [Originally Added On: August 17th, 2010]
- ChemTaverna Workflows of ONS Web Services now on MyExperiment [Last Updated On: August 17th, 2024] [Originally Added On: October 11th, 2010]
- Open Notebook Science in Drug Discovery at Opal Event [Last Updated On: August 17th, 2024] [Originally Added On: October 11th, 2010]
- Cheminfo Retrieval Classes 1 and 2 in 2010 [Last Updated On: August 17th, 2024] [Originally Added On: October 11th, 2010]
- The Meaning of Data panel at a class on the Rhetoric of Science [Last Updated On: August 17th, 2024] [Originally Added On: October 11th, 2010]
- Dynamic links to private tagged Mendeley collections [Last Updated On: August 17th, 2024] [Originally Added On: October 16th, 2010]
- Elizabeth Brown's guest lecture for ChemInfo Retrieval [Last Updated On: August 17th, 2024] [Originally Added On: November 7th, 2010]
- Nanoinformatics 2010 Conference Report [Last Updated On: August 17th, 2024] [Originally Added On: November 7th, 2010]
- Dana Vanderwall on Cheminformatics at Drexel [Last Updated On: August 17th, 2024] [Originally Added On: December 11th, 2010]
- Mirza PhD defense on the Ugi reaction for anti-malarial screening [Last Updated On: August 17th, 2024] [Originally Added On: December 13th, 2010]
- Visualizing Social Networks in Open Notebooks [Last Updated On: August 17th, 2024] [Originally Added On: December 20th, 2010]
- Chemical Information Validation Results from Fall 2010 [Last Updated On: August 17th, 2024] [Originally Added On: January 12th, 2011]
- Science Online 2011 Thoughts [Last Updated On: August 17th, 2024] [Originally Added On: January 22nd, 2011]
- The Spectral Game with ChemDoodle [Last Updated On: August 17th, 2024] [Originally Added On: February 14th, 2011]
- Predicting temperature-dependent solubility for solvent selection [Last Updated On: August 17th, 2024] [Originally Added On: February 14th, 2011]
- Alfa Aesar melting point data now openly available [Last Updated On: August 17th, 2024] [Originally Added On: February 22nd, 2011]
- ONS Solubility Challenge Book cited in a Langmuir nanotechnology paper [Last Updated On: August 17th, 2024] [Originally Added On: February 27th, 2011]
- Validating Melting Point Data from Alfa Aesar, EPI and MDPI [Last Updated On: August 17th, 2024] [Originally Added On: March 6th, 2011]
- Open modeling of melting point data [Last Updated On: August 17th, 2024] [Originally Added On: March 23rd, 2011]
- Towards the automated discovery of useful solubility applications [Last Updated On: August 17th, 2024] [Originally Added On: March 29th, 2011]
- ACS and ACRL presentations on web services and trust in science [Last Updated On: August 17th, 2024] [Originally Added On: April 10th, 2011]
- Collaboration using Open Notebook Science in Academia book chapter [Last Updated On: August 17th, 2024] [Originally Added On: May 8th, 2011]
- Evan Curtin is the May 2011 RSC ONS Challenge Winner [Last Updated On: August 17th, 2024] [Originally Added On: May 8th, 2011]
- Breast Cancer Coalition talk on ONS and Taxol solubility [Last Updated On: August 17th, 2024] [Originally Added On: May 15th, 2011]
- La Science par Cahier de Laboratoire Ouvert à l'Acfas [Last Updated On: August 17th, 2024] [Originally Added On: May 15th, 2011]
- More Open Melting Points from EPI and other sources: on the path to ultimate curation [Last Updated On: August 17th, 2024] [Originally Added On: May 29th, 2011]
- More on 4-benzyltoluene and the impact of melting point data curation and transparency [Last Updated On: August 17th, 2024] [Originally Added On: June 12th, 2011]
- The quest to determine the melting point of 4-benzyltoluene [Last Updated On: August 17th, 2024] [Originally Added On: June 12th, 2011]
- Open Melting Points on iPhone via MMDS [Last Updated On: August 17th, 2024] [Originally Added On: June 12th, 2011]
- My talk at SLA on Trust in Science and Open Melting Point Collections [Last Updated On: August 17th, 2024] [Originally Added On: June 19th, 2011]
- Live Tweeting Haumea: the Open Science Ratchet at work? [Last Updated On: August 17th, 2024] [Originally Added On: June 19th, 2011]
- Google Apps Scripts for an intuitive interface to organic chemistry Open Notebooks [Last Updated On: August 17th, 2024] [Originally Added On: June 19th, 2011]
- The 4-benzyltoluene melting point twist [Last Updated On: August 17th, 2024] [Originally Added On: June 26th, 2011]
- Open Notebook Science Talk at HUBbub 2011 [Last Updated On: August 17th, 2024] [Originally Added On: July 3rd, 2011]
- Practical Tips on using Google Apps Scripts for Chemistry Applications [Last Updated On: August 17th, 2024] [Originally Added On: July 17th, 2011]
- Burberry Acoustic - 'Chemistry' by One Night Only for Vogue Fashion Night Out [Last Updated On: August 17th, 2024] [Originally Added On: July 23rd, 2011]
- Rapid analysis of melting point trends and models using Google Apps Scripts [Last Updated On: August 17th, 2024] [Originally Added On: July 24th, 2011]
- Open Melting Point Collection Book Edition 1 [Last Updated On: August 17th, 2024] [Originally Added On: August 14th, 2011]
- Google Apps Scripts Workshop at Drexel University [Last Updated On: August 17th, 2024] [Originally Added On: August 21st, 2011]
- Patrick Ndungu talk at Drexel on Nanotechnology [Last Updated On: August 17th, 2024] [Originally Added On: August 21st, 2011]
- MiniSymposium Bradley Lab 2011 [Last Updated On: August 17th, 2024] [Originally Added On: October 9th, 2011]
- Chemistry [Last Updated On: August 17th, 2024] [Originally Added On: October 10th, 2011]
- Interpol - Rest My Chemistry [Last Updated On: August 17th, 2024] [Originally Added On: October 10th, 2011]
- Queens Of The Stone Age - Better Living Through Chemistry [Last Updated On: August 17th, 2024] [Originally Added On: October 12th, 2011]
- Greatest Chemistry Discoveries - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 13th, 2011]
- Butterfingers - The Chemistry - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 13th, 2011]
- Lec 1 Introduction to Chemistry [Last Updated On: August 17th, 2024] [Originally Added On: October 14th, 2011]
- KATNISS AND PEETA: Chemistry Screen Test using the cave scene from The Hunger Games - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 15th, 2011]
- The Smiths - Live on Data Run c. 1984, a British TV Program - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 15th, 2011]
- Organic Chemistry reactions - 7 clues from Obi Wan - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 15th, 2011]
- CHEMISTRY Period Live Fullmetal Alchemist Brotherhood 4 OP - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 16th, 2011]
- Rush - Chemistry - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 16th, 2011]
- The Office: Jim and Pam - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 17th, 2011]
- Chemistry 1A - Lecture 3 - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 19th, 2011]
- Chemical Party - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 19th, 2011]
- Shiny Toy Guns-Chemistry of a Car Crash (with lyrics) - Video [Last Updated On: August 17th, 2024] [Originally Added On: October 21st, 2011]