We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
4 Chemical Stocks Set to Pull Off a Beat This Earnings Season
Read MoreHide Full Article
Chemical companies’ first-quarter results are expected to reflect the pick-up in demand across major end-use industries from the coronavirus-led downturn. The pandemic put a brake on industrial and manufacturing activities through the first half of 2020 due to the rollout of lockdowns and restrictions by governments around the world. This led to a slump in demand for chemicals in the key markets, including automotive, construction and electronics. In particular, disruptions due to coronavirus hurt industrial activities in China, a top consumer of chemicals.
The chemical industry also faced headwinds from feedstock cost inflation due to supply chain disruptions as a result of the health crisis. The companies in this space also grappled with higher logistics costs as disruptions associated with pandemic-impaired logistics globally.
However, with the easing of restrictions on business activities globally and an economic rebound in China, demand for chemicals started to pick up from the third quarter of 2020 across major end-use industries. The recovery gained further steam in the March quarter on an upswing in global industrial activities.
A strong revival in automotive and construction, two major chemical-consuming markets, is likely to have spurred up the demand for chemicals in the first quarter. The automotive sector has witnessed a speedy recovery after the virus-led slump on the back of a rebound in customer demand. An uptick in automotive OEM production rates has led to a recovery in demand for chemicals in the automotive market.
The construction sector has also bounced back strongly on the resumption of projects that were deferred earlier partly due to supply chain disruptions. Notably, strength is being witnessed in residential construction globally, supported by lower interest rates. As such, higher industrial demand is likely to have provided support to sales volumes and the top line of chemical companies in the first quarter. Companies in this space are also expected to have benefited from higher demand for chemicals and materials across healthcare and packaging markets, thanks to coronavirus.
Against a still-challenging backdrop, chemical makers remain focused on self-help measures, including cost-cutting and productivity improvement, expansion into high-growth markets, restructuring, operational efficiency improvement, and actions to strengthen balance sheets and boost cash flows. A number of companies in this space have also been taking price increase actions to counter input cost inflation. Chemical companies also remain actively focused on acquisitions to diversify and drive growth. The benefits of these actions might reflect on their first-quarter results.
Among the chemical companies that have already come up with their quarterly numbers, we have seen solid earnings beats from prominent names such as Dow Inc. (DOW - Free Report) , Eastman Chemical Company (EMN - Free Report) and Celanese Corporation (CE - Free Report) on the back of a continued revival in end-market demand.
Expectations for Q1
The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the sectors that are expected to deliver positive earnings growth in the first quarter. Overall earnings for the sector are projected to rise 75.9% on 8.6% higher revenues, per the latest Earnings Preview. The projections reflect an improvement from a 28.1% rise in earnings on a 1.1% increase in revenues that was witnessed in the fourth quarter.
How to Pick Winners?
Given the large number of players operating in the chemical space, picking the right stocks is apparently not an easy task. But our proprietary methodology makes it fairly simple. One can trim down the list with the combination of a favorable Zacks Rank — Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — and a positive Zacks Earnings ESP. You can uncover the best stocks to buy or sell before they report with our Earnings ESP Filter.
Earnings ESP — the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate — is our proprietary methodology for determining stocks that have high chances of delivering earnings surprises in their next announcements. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as much as 70%.
Our Choices
Below we list four chemical stocks that have the right combination of elements to pull off positive surprises this earnings season:
The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 9.4%. The Zacks Consensus Estimate for first-quarter earnings has been stable over the last 60 days. Benefits of cost-savings and productivity actions are expected to get reflected on DuPont’s results. The company is also expected to have benefited, in the first quarter, from higher demand for products used in personal protection as well as strong demand in semiconductor technologies and smartphones. Higher demand in water solutions and strength in residential construction markets are likely to have supported its performance.
Westlake Chemical Corporation (WLK - Free Report) has an Earnings ESP of +0.64% and a Zacks Rank #3. It is expected to report first-quarter results on May 4.
The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 318.1%. The consensus mark for first-quarter earnings has been revised 19.1% upward over the last 60 days. Westlake Chemical is likely to have benefited from higher demand for polyethylene in the first quarter owing to its focus in specialty applications that include food packaging and healthcare. The company is also expected to have gained from higher demand for polyvinyl chloride resin and construction-related downstream vinyl products with the easing of pandemic-induced restrictions.
Westlake Chemical Corporation Price and EPS Surprise
Koppers Holdings Inc. (KOP - Free Report) has an Earnings ESP of +5.26% and carries a Zacks Rank #2. The company is scheduled to report first-quarter results on May 7. It delivered an earnings surprise of 24.6%, on average, over the trailing four quarters.
The company is likely to have gained from sustained demand for copper-based preservatives in the United States and improved industrial and agricultural demand in international markets. Benefits of higher demand for utility poles in the United States and Australia are also likely to reflect on its performance.
Trinseo S.A. (TSE - Free Report) has an Earnings ESP of +8.08% and carries a Zacks Rank #3. The company is scheduled to report first-quarter results on May 6.
The Zacks Consensus Estimate for first-quarter earnings has been revised 89% upward over the last 60 days. The company is expected to have benefited from demand strength in end markets such as tires, automotive, appliances, construction and packaging, which is likely to have driven its volumes. Benefits of cost-reduction and commercial excellence initiatives are also expected to reflect on its results.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
Image: Bigstock
4 Chemical Stocks Set to Pull Off a Beat This Earnings Season
Chemical companies’ first-quarter results are expected to reflect the pick-up in demand across major end-use industries from the coronavirus-led downturn. The pandemic put a brake on industrial and manufacturing activities through the first half of 2020 due to the rollout of lockdowns and restrictions by governments around the world. This led to a slump in demand for chemicals in the key markets, including automotive, construction and electronics. In particular, disruptions due to coronavirus hurt industrial activities in China, a top consumer of chemicals.
The chemical industry also faced headwinds from feedstock cost inflation due to supply chain disruptions as a result of the health crisis. The companies in this space also grappled with higher logistics costs as disruptions associated with pandemic-impaired logistics globally.
However, with the easing of restrictions on business activities globally and an economic rebound in China, demand for chemicals started to pick up from the third quarter of 2020 across major end-use industries. The recovery gained further steam in the March quarter on an upswing in global industrial activities.
A strong revival in automotive and construction, two major chemical-consuming markets, is likely to have spurred up the demand for chemicals in the first quarter. The automotive sector has witnessed a speedy recovery after the virus-led slump on the back of a rebound in customer demand. An uptick in automotive OEM production rates has led to a recovery in demand for chemicals in the automotive market.
The construction sector has also bounced back strongly on the resumption of projects that were deferred earlier partly due to supply chain disruptions. Notably, strength is being witnessed in residential construction globally, supported by lower interest rates. As such, higher industrial demand is likely to have provided support to sales volumes and the top line of chemical companies in the first quarter. Companies in this space are also expected to have benefited from higher demand for chemicals and materials across healthcare and packaging markets, thanks to coronavirus.
Against a still-challenging backdrop, chemical makers remain focused on self-help measures, including cost-cutting and productivity improvement, expansion into high-growth markets, restructuring, operational efficiency improvement, and actions to strengthen balance sheets and boost cash flows. A number of companies in this space have also been taking price increase actions to counter input cost inflation. Chemical companies also remain actively focused on acquisitions to diversify and drive growth. The benefits of these actions might reflect on their first-quarter results.
Among the chemical companies that have already come up with their quarterly numbers, we have seen solid earnings beats from prominent names such as Dow Inc. (DOW - Free Report) , Eastman Chemical Company (EMN - Free Report) and Celanese Corporation (CE - Free Report) on the back of a continued revival in end-market demand.
Expectations for Q1
The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the sectors that are expected to deliver positive earnings growth in the first quarter. Overall earnings for the sector are projected to rise 75.9% on 8.6% higher revenues, per the latest Earnings Preview. The projections reflect an improvement from a 28.1% rise in earnings on a 1.1% increase in revenues that was witnessed in the fourth quarter.
How to Pick Winners?
Given the large number of players operating in the chemical space, picking the right stocks is apparently not an easy task. But our proprietary methodology makes it fairly simple. One can trim down the list with the combination of a favorable Zacks Rank — Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — and a positive Zacks Earnings ESP. You can uncover the best stocks to buy or sell before they report with our Earnings ESP Filter.
Earnings ESP — the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate — is our proprietary methodology for determining stocks that have high chances of delivering earnings surprises in their next announcements. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as much as 70%.
Our Choices
Below we list four chemical stocks that have the right combination of elements to pull off positive surprises this earnings season:
DuPont de Nemours, Inc. (DD - Free Report) has an Earnings ESP of +2.27% and a Zacks Rank #2. It is expected to report first-quarter results on May 4. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 9.4%. The Zacks Consensus Estimate for first-quarter earnings has been stable over the last 60 days. Benefits of cost-savings and productivity actions are expected to get reflected on DuPont’s results. The company is also expected to have benefited, in the first quarter, from higher demand for products used in personal protection as well as strong demand in semiconductor technologies and smartphones. Higher demand in water solutions and strength in residential construction markets are likely to have supported its performance.
DuPont de Nemours, Inc. Price and EPS Surprise
DuPont de Nemours, Inc. price-eps-surprise | DuPont de Nemours, Inc. Quote
Westlake Chemical Corporation (WLK - Free Report) has an Earnings ESP of +0.64% and a Zacks Rank #3. It is expected to report first-quarter results on May 4.
The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 318.1%. The consensus mark for first-quarter earnings has been revised 19.1% upward over the last 60 days. Westlake Chemical is likely to have benefited from higher demand for polyethylene in the first quarter owing to its focus in specialty applications that include food packaging and healthcare. The company is also expected to have gained from higher demand for polyvinyl chloride resin and construction-related downstream vinyl products with the easing of pandemic-induced restrictions.
Westlake Chemical Corporation Price and EPS Surprise
Westlake Chemical Corporation price-eps-surprise | Westlake Chemical Corporation Quote
Koppers Holdings Inc. (KOP - Free Report) has an Earnings ESP of +5.26% and carries a Zacks Rank #2. The company is scheduled to report first-quarter results on May 7. It delivered an earnings surprise of 24.6%, on average, over the trailing four quarters.
The company is likely to have gained from sustained demand for copper-based preservatives in the United States and improved industrial and agricultural demand in international markets. Benefits of higher demand for utility poles in the United States and Australia are also likely to reflect on its performance.
Koppers Holdings Inc. Price and EPS Surprise
Koppers Holdings Inc. price-eps-surprise | Koppers Holdings Inc. Quote
Trinseo S.A. (TSE - Free Report) has an Earnings ESP of +8.08% and carries a Zacks Rank #3. The company is scheduled to report first-quarter results on May 6.
The Zacks Consensus Estimate for first-quarter earnings has been revised 89% upward over the last 60 days. The company is expected to have benefited from demand strength in end markets such as tires, automotive, appliances, construction and packaging, which is likely to have driven its volumes. Benefits of cost-reduction and commercial excellence initiatives are also expected to reflect on its results.
Trinseo S.A. Price and EPS Surprise
Trinseo S.A. price-eps-surprise | Trinseo S.A. Quote
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>