Chemical companies’ fourth-quarter results are expected to reflect continued demand headwinds in certain key markets, including consumer durables, and building & construction, cautious spending by customers, and pockets of inventory de-stocking. Nevertheless, the results of these companies are likely to have been supported by cost-saving and productivity improvement actions. 

We have handpicked a few chemical companies — Albemarle Corporation (ALB Quick QuoteALB - Free Report) , Sociedad Quimica y Minera de Chile S.A. (SQM Quick QuoteSQM - Free Report) and Methanex Corporation (MEOH Quick QuoteMEOH - Free Report) — which are set to beat earnings estimates this earnings season.

How Have Things Shaped Up for Chemical Stocks?

The chemical industry bore the brunt of a demand slowdown in certain major markets and continued customer inventory de-stocking in 2025. The downturn in the key building & construction and consumer electronics markets played spoilsport. In North America, uncertainties surrounding the U.S. housing market have weighed on building & construction. Elevated borrowing costs and inflation took a bite out of the residential construction industry. 

The consumer electronics market, a key driver of demand for specialty chemicals and advanced materials, was among the hardest hit. Following the post-pandemic boom, global electronics demand cooled amid high inflation, elevated interest rates and cautious consumer behavior. 

The automotive industry, traditionally a significant consumer of chemicals, experienced a mixed year. While the shift toward electric vehicles has created pockets of demand, overall vehicle production was constrained by high input costs and economic uncertainties. High interest rates, along with concerns over economic slowdown and tariffs, put pressure on the automotive market in 2025. In packaging, inflationary pressures constrained discretionary consumer spending, impacting the sector. 

Manufacturing activities also softened amid weaker demand for goods and higher borrowing costs. Demand for chemicals in the industrial sector weakened due to constrained industrial production. The imposition of hefty tariffs introduced significant headwinds for the chemical industry. 

A slower recovery in economic activities in China, a major consumer of chemicals, hurt demand in that country. China grappled with the United States on trade, slow growth in industrial output and sluggish consumer spending. The slowdown in the real estate sector further suppressed demand for construction chemicals. Moreover, geopolitical tensions, low consumer confidence and high inflation dampened demand in Europe.  

Chemical demand is likely to have remained subdued in the key markets in the December quarter. The soft demand conditions, along with a weak macroeconomic environment and tariff-induced impacts, are likely to have weighed on volumes of chemical makers. 

Chemical companies are expected to have faced headwinds from raw material and energy cost inflation, and supply-chain and freight transportation disruptions in the fourth quarter. Tariffs have led to increased costs for raw materials, resulting in higher production expenses for the industry players. 

Nonetheless, the benefits of self-help actions, including those to raise the selling prices of chemical products, cost-cutting and productivity improvement, operational efficiency enhancement, strategic acquisitions and actions to strengthen the balance sheet and boost cash flows, are expected to reflect on the performance of companies in this space.  

Expectations for Q4

The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the Zacks sectors that are expected to see a rise in earnings for the fourth quarter. Overall earnings for the space are projected to increase 2.8% on 9.5% higher revenues, per the latest Earnings Outlook.

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 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 three chemical stocks that have the right combination of elements to pull off an earnings surprise this time around:

Albemarle has an Earnings ESP of +70.92% and carries a Zacks Rank #1. The company is expected to report on Feb. 11. 

Albemarle beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once. The company has a trailing four-quarter earnings surprise of roughly 35.3%, on average. The Zacks Consensus Estimate for earnings is pegged at a loss of 52 cents. ALB is likely to have benefited from higher volumes in its lithium business and a recovery in prices. The ramp-up of lithium projects and plant productivity improvements are expected to have supported volumes. The benefits of actions to cut costs, optimize the conversion network and increase efficiencies are expected to be reflected in ALB’s performance. 

Sociedad Quimica has an Earnings ESP of +13.33% and a Zacks Rank #1. It is slated to report on Feb. 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sociedad Quimica missed the Zacks Consensus Estimate in each of the trailing four quarters at an average of 23.1%. The Zacks Consensus Estimate for fourth-quarter earnings stands at 75 cents. SQM is gaining from favorable trends in the lithium market underpinned by strong electric vehicle (EV) sales. Higher demand is expected to have supported the company’s lithium sales volumes. Higher lithium prices driven by strong demand from EVs and energy storage systems, along with supply disruptions, are also likely to have aided its performance. SQM’s Specialty Plant Nutrition business is expected to have benefited from higher demand across key end markets. Iodine volumes are likely to have been boosted as well, by growing demand following the post-pandemic recovery. 

Methanex has an Earnings ESP of +6.17% and carries a Zacks Rank #2. It is slated to report on Mar. 5. 

Methanex surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The company has a trailing four-quarter earnings surprise of roughly 17.4%, on average. The Zacks Consensus Estimate for fourth-quarter earnings stands at 81 cents. MEOH is expected to have seen higher production in the fourth quarter, aided by additional production from Beaumont and Natgasoline, added from OCI’s methanol business acquisition. Higher methanol sales volumes are also expected to have driven its top line and margins amid headwinds from lower realized prices.