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4 Chemical Stocks Poised to Outshine Q2 Earnings Estimates
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The chemical industry is riding on an upturn in the global economy and strength across major end-use markets such as construction and automotive. Improving fundamentals in the energy space driven by an upswing in crude oil prices also augur well for the industry.
The U.S. Chemical Industry bounced back from the havoc wreaked by last year’s hurricanes, and is poised for a smooth run this year. The American Chemistry Council (ACC), a leading industry trade group,envisions national chemical production (excluding pharmaceuticals) to rise 3.4% in 2018. Growth has come from a pickup in U.S. manufacturing, higher demand across light vehicles, housing markets, capital investments and strengthening export markets.
Chemical makers are seeing strong demand from the construction and automotive sectors. A rebound in crude oil prices has also led to a recovery in demand for chemicals in the energy market and a favorable pricing environment for chemical products as their prices essentially move in tandem with oil prices.
bears testimony to the fact that the chemical industry is in fine shape. The favorable rank places the industry in the top 25% of the 250 plus Zacks industries. Our back testing shows that the top 50% of the Zacks ranked industries outperforms the bottom half by a factor of more than two to one.
Despite some headwinds, including a spike in raw materials costs as a result of short supply and softness in agricultural commodity prices due to persistent grain glut, chemical companies are likely to continue the Q1 earnings momentum this time around as the fundamental driving factors remain in place.
Cost-cutting measures and productivity improvement actions by chemical companies should continue to reap industry-wide margin improvements in Q2. Moreover, a number of chemical makers are taking appropriate pricing actions (reflected by hikes in chemical prices), to offset raw material cost inflation, which should also provide margin benefits.
Moreover, chemical companies remain actively focused on mergers and acquisitions to diversify and drive growth. Synergies from acquisitions should also lend support to earnings in Q2.
Expectations for Q2
Per the Zacks Industry classification, the chemical industry is under the broader Basic Materials
sector. Earnings growth for the Basic Materials sector in Q1 was second only to the energy sector. Overall earnings for the sector climbed 56.4% while revenues spiked 24.3%.
The earnings picture for Q2 looks promising. Earnings for the sector are projected to surge 53.5% in Q2, while revenues are expected to improve 24.1%, per the latest Earnings Preview.
How to Pick the Winners?
Given the large number of players operating in the chemicals space, picking the right stocks is apparently not an easy task, but our proprietary methodology makes it easier to find the best ones. 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 notch up positive surprises this earnings season:
Celanese is an integrated global producer of value-added industrial chemicals, and will be releasing Q2 results after the bell on Jul 19. The Zacks Consensus Estimate for the quarter is $2.40. The stock has an Earnings ESP of +3.13% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celanese has an expected long-term (three-five years) earnings growth of 8.9%. It delivered positive earnings surprises in each of the last four quarters, with an average beat of around 7%.
Eastman Chemical, who reports after the bell on July 26th, is a global advanced material and specialty additives company. The Zacks Consensus Estimate for the quarter currently stands at $2.20. The stock has an Earnings ESP of +0.91% and a Zacks Rank #2.
Eastman Chemical has an expected long-term earnings growth of 9.4%. It delivered positive earnings surprises in each of the last four quarters, with an average beat of around 17.8%.
Ingevityprovides specialty chemicals, carbon materials and technologies. NGVT, is reporting Q2 results after the bell on Jul 25. The Zacks Consensus Estimate for the quarter is 99 cents.
This Zacks Rank #2 stock has an Earnings ESP of +9.14%. The company topped earnings estimates in each of the trailing four quarters, delivering a positive earnings surprise of 20.2%. It has an expected long-term earnings growth of 12%.
Albemarleis a global specialty chemicals company, with leading positions in lithium, bromine, refining catalysts and applied surface treatments reports Q2 results after the bell on Aug 7. The Zacks Consensus Estimate for the quarter stands at $1.28.
The stock has an Earnings ESP of +0.43% and carries a Zacks Rank #3. The company has an expected long-term earnings growth of 13.9%. It also delivered positive earnings surprises in each of the last four quarters, with an average beat of around 5.5%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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4 Chemical Stocks Poised to Outshine Q2 Earnings Estimates
The chemical industry is riding on an upturn in the global economy and strength across major end-use markets such as construction and automotive. Improving fundamentals in the energy space driven by an upswing in crude oil prices also augur well for the industry.
The U.S. Chemical Industry bounced back from the havoc wreaked by last year’s hurricanes, and is poised for a smooth run this year. The American Chemistry Council (ACC), a leading industry trade group,envisions national chemical production (excluding pharmaceuticals) to rise 3.4% in 2018. Growth has come from a pickup in U.S. manufacturing, higher demand across light vehicles, housing markets, capital investments and strengthening export markets.
Chemical makers are seeing strong demand from the construction and automotive sectors. A rebound in crude oil prices has also led to a recovery in demand for chemicals in the energy market and a favorable pricing environment for chemical products as their prices essentially move in tandem with oil prices.
The Zacks Industry Rank of 63 carried by the Zacks Chemicals Diversified industry
bears testimony to the fact that the chemical industry is in fine shape. The favorable rank places the industry in the top 25% of the 250 plus Zacks industries. Our back testing shows that the top 50% of the Zacks ranked industries outperforms the bottom half by a factor of more than two to one.
Despite some headwinds, including a spike in raw materials costs as a result of short supply and softness in agricultural commodity prices due to persistent grain glut, chemical companies are likely to continue the Q1 earnings momentum this time around as the fundamental driving factors remain in place.
Cost-cutting measures and productivity improvement actions by chemical companies should continue to reap industry-wide margin improvements in Q2. Moreover, a number of chemical makers are taking appropriate pricing actions (reflected by hikes in chemical prices), to offset raw material cost inflation, which should also provide margin benefits.
Moreover, chemical companies remain actively focused on mergers and acquisitions to diversify and drive growth. Synergies from acquisitions should also lend support to earnings in Q2.
Expectations for Q2
Per the Zacks Industry classification, the chemical industry is under the broader Basic Materials
sector. Earnings growth for the Basic Materials sector in Q1 was second only to the energy sector. Overall earnings for the sector climbed 56.4% while revenues spiked 24.3%.
The earnings picture for Q2 looks promising. Earnings for the sector are projected to surge 53.5% in Q2, while revenues are expected to improve 24.1%, per the latest Earnings Preview.
How to Pick the Winners?
Given the large number of players operating in the chemicals space, picking the right stocks is apparently not an easy task, but our proprietary methodology makes it easier to find the best ones. 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 notch up positive surprises this earnings season:
Celanese Corporation (CE - Free Report)
Celanese is an integrated global producer of value-added industrial chemicals, and will be releasing Q2 results after the bell on Jul 19. The Zacks Consensus Estimate for the quarter is $2.40. The stock has an Earnings ESP of +3.13% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celanese has an expected long-term (three-five years) earnings growth of 8.9%. It delivered positive earnings surprises in each of the last four quarters, with an average beat of around 7%.
Eastman Chemical Company (EMN - Free Report)
Eastman Chemical, who reports after the bell on July 26th, is a global advanced material and specialty additives company. The Zacks Consensus Estimate for the quarter currently stands at $2.20. The stock has an Earnings ESP of +0.91% and a Zacks Rank #2.
Eastman Chemical has an expected long-term earnings growth of 9.4%. It delivered positive earnings surprises in each of the last four quarters, with an average beat of around 17.8%.
Ingevity Corporation (NGVT - Free Report)
Ingevityprovides specialty chemicals, carbon materials and technologies. NGVT, is reporting Q2 results after the bell on Jul 25. The Zacks Consensus Estimate for the quarter is 99 cents.
This Zacks Rank #2 stock has an Earnings ESP of +9.14%. The company topped earnings estimates in each of the trailing four quarters, delivering a positive earnings surprise of 20.2%. It has an expected long-term earnings growth of 12%.
Albemarle Corporation (ALB - Free Report)
Albemarleis a global specialty chemicals company, with leading positions in lithium, bromine, refining catalysts and applied surface treatments reports Q2 results after the bell on Aug 7. The Zacks Consensus Estimate for the quarter stands at $1.28.
The stock has an Earnings ESP of +0.43% and carries a Zacks Rank #3. The company has an expected long-term earnings growth of 13.9%. It also delivered positive earnings surprises in each of the last four quarters, with an average beat of around 5.5%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>