Back to top

Image: Bigstock

DOW or CE: Which Chemicals Stock Will Post Better Q1 Earnings?

Read MoreHide Full Article

A couple of chemical companies are lined up to report their quarterly numbers tomorrow. A rebound in end-market demand from the coronavirus-induced slowdown is likely to have aided the performance of chemical companies in the first quarter.  

The chemical industry bore the brunt of demand shocks for much of first-half 2020 as global industrial activities were put to a halt amid the pandemic. Containment measures by governments across the globe to stem the spread of infection paralyzed industrial activities and gutted demand for chemicals across major end-use markets such as construction, automotive and electronics.

Notably, disruptions associated with the pandemic hurt chemical demand in China, a major consumer, as industrial activities in the country took a blow due to lockdown restrictions. Moreover, a downturn in industrial and manufacturing activities due to lockdowns affected demand for chemicals in North America and Europe.

However, the chemical industry has bounced back strongly from the virus-led slowdown on an uptick in demand in the key markets, a strong economic rebound in China and the reopening of the major economies around the world. Demand for chemicals started to pick up in the third quarter of 2020 with a rebound in global economic activities. The upturn in demand is being driven by an upswing in manufacturing and industrial activities globally. The recovery gained further steam in the March quarter.

A rebound in the major markets is likely to have spruced up demand for chemicals in the first quarter. Higher industrial demand is expected to have boosted sales volumes and the top line of chemical companies in the quarter.

Moreover, the benefits of strategic measures, including cost management and productivity improvement, acquisitions, and actions to raise selling prices to counter raw material and logistics cost inflation, might reflect on the first-quarter results of the companies in this space.

Per the Zacks industry classification, the chemical industry falls under the broader Basic Materials sector. Basic Materials is among the sectors that are expected to deliver profitability growth above the pre-pandemic levels in the first quarter. Overall earnings for the sector are projected to rise 65.2% on 10.7% higher revenues, per the latest Earnings Preview. The projections reflect an improvement from a 28.1% rise in earnings on a 1.6% increase in revenues that was witnessed in the fourth quarter.

PPG Industries, Inc. (PPG - Free Report) kicked off the first-quarter earnings season for the chemical industry last Thursday. The company delivered solid earnings beats on strength in its global architectural coatings business.

We take a look at two prominent chemical companies that are gearing up to report their Q1 results on Apr 22.

Dow Inc. (DOW - Free Report) will report results before the bell. Our proven model predicts an earnings beat for the company this time around. This is because it has an Earnings ESP of +0.35% and a Zacks Rank #1 (Strong Buy). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for revenues is currently pegged at $10,827 million. The consensus estimate for earnings is $1.10.

The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 21%.

Benefits of cost savings and productivity actions are expected to get reflected on the company’s first-quarter results. Dow is also likely to have gained from higher demand for its materials across healthcare and packaging markets, and demand recovery across automotive, construction and electronics. However, plant turnaround costs are likely to have impacted its first-quarter performance. (Read more: Dow Warms Up to Q1 Earnings: What's in the Cards?)


Dow Inc. Price and EPS Surprise


Dow Inc. Price and EPS Surprise

Dow Inc. price-eps-surprise | Dow Inc. Quote

Celanese Corporation (CE - Free Report) will report results after the closing bell. Our proven model does not conclusively predict an earnings beat for the company. This is because it has an Earnings ESP of 0.00% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for revenues for the first quarter is currently pegged at $1,723 million. The consensus estimate for earnings is $3.01.

The company beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 15.2%, on average.

The benefits of the company’s productivity and operational improvement actions, investments in high-return organic projects and strategic acquisitions are likely to get reflected on its first-quarter performance. A strong rebound in demand in the automotive and electronics end markets is also likely to have contributed to its results. However, it is likely to have faced headwinds stemming from higher raw material costs. (Read more: Celanese to Report Q1 Earnings: What's in the Offing?)


Celanese Corporation Price and EPS Surprise


Celanese Corporation Price and EPS Surprise

Celanese Corporation price-eps-surprise | Celanese Corporation Quote


Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?

Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2021 today >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

PPG Industries, Inc. (PPG) - free report >>

Dow Inc. (DOW) - free report >>

Celanese Corporation (CE) - free report >>