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Zacks Industry Outlook Highlights: DuPont, Dow Chemical, Eastman Chemical and Celanese

DD DOW EMN CE

 ZacksTrade Now

For Immediate Release

 

Chicago, IL – May 11, 2012 – Today, Zacks Equity Research discusses the U.S. Chemical Companies, including EI DuPont de Nemours & Co (DD - Analyst Report), The Dow Chemical Company (DOW - Analyst Report), Eastman Chemical Company (EMN - Analyst Report) and Celanese Corp. (CE - Analyst Report).

 

A synopsis of today’s Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/74899/chemical-industry-stock-outlook-may-2012

 

The American Chemistry Council notes that emerging market growth, abundant shale gas and a still supportive dollar exchange rate should help drive U.S. chemical exports.

A string of factors are driving growth in the export markets including favorable energy costs stemming from the abundance of shale gas and strong demand from the emerging markets. Affordable natural gas and ethane (derived from shale gas) offer U.S. producers a compelling cost advantage over their global counterparts who use a more expensive, oil-based feedstock.

Further, cost-cutting measures implemented by chemical companies, such as plant closures, aggressive cost containment and production improvement initiatives, should yield industry-wide margin improvements. Cash flows derived through these actions can be used for growth.

Mergers and acquisitions offer chemical companies another means to shore up growth in this difficult scenario. These companies remain focused on exploring growth opportunities in the fast-growing emerging markets, particularly the lucrative regions of Asia-Pacific and Latin America such as China and Brazil.

A major deal in this space was last year’s acquisition of Danisco by EI DuPont de Nemours & Co ((DD - Analyst Report)) for $6.3 billion. The acquisition strengthened the company’s presence in the food ingredient and enzyme markets, and expanded its presence in industrial biotechnology and biofuels.

The deal synced well with DuPont’s strategy to expand beyond its chemical and manufacturing focus into the “megatrend” sectors of agribusiness and alternative energy. Both industries are expected to grow rapidly in the coming years as food demand and prices increase and clean energy policies gain more ground.

Some of the key end-markets for chemical products are on an uptrend. This has been manifested by the recent earnings reports of leading chemical players. DuPont, for example, logged a double-digit surge in sales riding on higher sales volume in the Agriculture segment. Danisco contributed to higher profit in the quarter.

Despite softness in the consumer electronics segment, the company is poised for growth on the heels of strong momentum in agriculture and food businesses. On the cost-saving front, DuPont remains on track to achieve its fixed cost productivity targets of $1 billion by 2012.

The other chemical titan, The Dow Chemical Company ((DOW - Analyst Report)), is delivering cost synergies from the Rohm & Haas acquisition and is targeting synergy capture of $2 billion by the end of 2012. Dow is also benefiting from strong fundamentals in agriculture and food markets. It believes economic recovery will gain momentum in the second quarter and through the remainder of 2012.

Moreover, Dow sees an improving U.S. economy citing tailwind from the nation’s rich access to low-cost natural gas. Despite challenges in Europe faced by both DuPont and Dow, we are optimistic about the long-term prospects of these two industry behemoths.

Eastman Chemical Company ((EMN - Analyst Report)) is expected to benefit from the acquisition of Solutia (expected to close in mid-2012). Higher selling prices contributed to revenue growth in the March quarter. The company’s diversified chemical portfolio, along with its integrated and diverse downstream businesses, is driving earnings. The company benefits from business restructuring and cost-cutting measures as well as increased capacity additions.

We also hold a favorable view on Celanese Corp. ((CE - Analyst Report)) despite the challenges it faces in Europe. The company’s profit shot up 29% in the March quarter on higher volumes and pricing in its acetyl intermediates and industrial specialties businesses. We like the company’s initiatives to improve margins and profits by running its plants better and controlling expenses, which should yield results through the rest of 2012.                              

 

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