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4 Specialty Chemicals Stocks to Gain From Industry Turnaround

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The global specialty chemicals industry took a hit last year as the COVID-19 pandemic brought economic activities to a halt around the world. Nonetheless, the situation seems to be improving as economies are gradually reopening, which in turn, should drive demand for specialty chemicals. Per a report by Mordor Intelligence, the specialty chemicals market was valued at $900 billion in 2020 and it is expected to see a CAGR of more than 4% during 2021 to 2026. The report stated that factors like robust growth in construction activities as well as agrochemicals, which is driven by growth in demand for food around the world as population increases, are expected to drive the specialty chemicals market.

Moreover, the global automotive sector is poised to make a comeback this year, which bodes well for the specialty chemicals industry since automotive is a major consumer. Notably, per a report by the IHS Markit, global light vehicle production is expected to increase 14% in 2021 to reach 84.3 million units. The report stated that recovery in demand as well as restoration of manufacturing operations in most regions are expected to drive this uptick.

Meanwhile, the rebound in manufacturing activity in major parts of the world should bump up demand for specialty chemicals. Notably, the Institute for Supply Management reported that the U.S. manufacturing purchasing managers’ index (“PMI”) for February came in at 60.8% compared to 58.7% in January, marking the ninth successive month of expansion. Elsewhere, manufacturing in the Eurozone also expanded in February. The IHS Markit reported that the Eurozone manufacturing PMI rose to 57.9% in February compared to 54.8% in January, as quoted in an Anadolu Agency article. Moreover, China’s manufacturing continued to expand in February, albeit at a slower pace. The Caixin/Markit manufacturing PMI was reported at 50.9% in February compared to 51.5% in January, as mentioned in a Reuters article.

Such positive developments are sure to boost demand for specialty chemicals going forward. In fact, reflective of this expected upturn, global chemicals output also increased at the start of 2021. Notably, the American Chemistry Council stated in a report that the global chemicals production increased 1.4% in January. Even though the pace of expansion was slower than in December, nonetheless chemicals output is continuing the global recovery that began in June.

4 Top Specialty Chemicals Stocks to Buy Now

The global specialty chemicals industry seems ready for a turnaround following the COVID-induced slump last year as demand perks up on resumption of economic activities. Notably, manufacturing activity across major global regions has been expanding while the automotive sector is also expected to rebound this year, in turn, driving demand for specialty chemicals. This makes it a good time to invest in specialty chemical names that can make the most of this potential upswing. We have handpicked four such stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ashland Global Holdings Inc. (ASH - Free Report) provides specialty chemical solutions worldwide. The company's Specialty Ingredients segment offers solutions to pharmaceutical companies; makers of personal care products, food, and beverages; makers of nutraceuticals and supplements; manufacturers of paint, coatings, and construction materials, and so on. It currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 27.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 83.9%.

Kraton Corporation (KRA - Free Report) manufactures and sells styrenic block copolymers, specialty polymers, and other products in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company’s chemical segment provides pine-based specialty products that include rosin-based tackifiers for packaging and pressure-sensitive adhesive applications; terpene-based tackifiers for bookbinding, hygiene, and pressure-sensitive adhesive applications, and so on. It currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved 82.8% north over the past 60 days. The company’s expected earnings growth rate for the current year is 64.3%.

Hawkins, Inc. (HWKN - Free Report) blends, manufactures, and distributes chemicals and other specialty ingredients in the United States and internationally. The company’s industrial segment offers industrial chemicals, products, and services to agriculture, chemical processing, electronics, energy, food, pharmaceutical, and plating industries. It currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-quarter earnings has moved up 6.3% over the past 60 days. The company’s expected earnings growth rate for the next quarter is 19.6%.

Element Solutions Inc. (ESI - Free Report) produces and sells specialty chemical products in the United States, China, and internationally. The company’s Industrial & Specialty segment provides industrial solutions, which include chemical systems, consumable chemicals and energy solutions and serves the aerospace, automotive, construction, consumer electronics, consumer packaged goods, and oil and gas production end markets. It currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has climbed 6.2% over the past 60 days. The company’s expected earnings growth rate for the current year is nearly 24%.

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