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4 Chemical Stocks Set to Pull Off a Beat This Earnings Season
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Chemical companies’ third-quarter results are expected to reflect recovering demand in key markets and the end of customer inventory destocking. Improved demand in automotive and a rebound in construction end markets are likely to have supported their performance. The results of chemical makers are also likely to have been aided by effective self-help actions, including pricing, cost-saving and productivity improvement initiatives. However, persistently high input, supply chain and logistics costs are likely to have been deterrents.
We have handpicked a few chemical companies — Avient Corporation (AVNT - Free Report) , Air Products and Chemicals, Inc. (APD - Free Report) , DuPont de Nemours, Inc. (DD - Free Report) and Huntsman Corporation (HUN - Free Report) — which are set to beat earnings estimates this earnings season.
How Have Things Shaped Up for Chemical Stocks?
Companies in the chemical space are expected to have benefited from an uptick in demand in certain major markets. The chemical industry bore the brunt of a demand slowdown and continued customer inventory de-stocking last year. 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. Global electronics demand cooled amid high inflation, elevated interest rates and cautious consumer behavior.
The automotive sector represents a crucial end market for chemical manufacturers. A decline in global vehicle production last year weighed on demand from this segment. Elevated interest rates, coupled with economic slowdown concerns and tariff-related uncertainties, further pressured the market. Demand for chemicals in automotive has been healthy this year, supported by accelerating electric vehicle adoption, especially in Asia and Europe. Better affordability, robust demand for hybrid models and aggressive promotional incentives are expected to lift new vehicle sales. As production picks up, the recovery momentum is likely to continue.
Chemical companies are also seeing signs of a recovery in demand across the construction and electronics markets. Demand in healthcare and packaging markets also remains steady. On a further positive note, customer inventory destocking in building & construction and consumer durables has largely ended, leading to low inventory levels. This is expected to have led to an uptick in chemical demand and volumes.
Also, the benefits of strategic 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 in the third quarter.
Partly offsetting these tailwinds, chemical makers are likely to have faced challenges from raw-material and energy-cost inflation and supply-chain and freight-transportation disruptions. Tariffs have led to increased costs for raw materials, resulting in higher production expenses for the industry players. Moreover, the Middle East conflict and the blockade of the Strait of Hormuz have led to significant supply disruptions and feedstock cost pressure. The impacts of inflationary pressures are expected to be reflected in the margins of chemical specialty companies in the September quarter.
Expectations for Q3
The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the Zacks sectors that are expected to see double-digit growth in earnings for the third quarter. Overall earnings for the space are projected to increase 34.2% on 6.8% 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 four chemical stocks that have the right combination of elements to pull off an earnings surprise this time around:
Avient has an Earnings ESP of +0.58% and carries a Zacks Rank #2. The company is scheduled to report on Nov. 4.
Avient surpassed the Zacks Consensus Estimate in each of the trailing four quarters at an average of 3.4%. The Zacks Consensus Estimate for earnings is pegged at 81 cents. AVNT is likely to have gained from the strength in sustainable solutions, cost-reduction actions and new business wins. Its mix toward defense, healthcare, telecom and chip packaging continues to support margins. Price/mix and productivity are expected to have contributed to margin expansion. Strong packaging and Asia momentum and healthy defense demand are likely to support results.
Air Products has beaten the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The company has a trailing four-quarter negative earnings surprise of roughly 2.9%, on average. The Zacks Consensus Estimate for fiscal fourth-quarter earnings stands at $3.60. APD’s strategic investments in high-return projects, new business deals and acquisitions are expected to support its results. Favorable pricing and higher on-site volumes are likely to drive its top line. APD is also expected to have benefited from its productivity actions.
Air Products and Chemicals, Inc. Price and EPS Surprise
DuPont has an Earnings ESP of +1.35% and carries a Zacks Rank #3. It is slated to report on Nov. 3.
DuPont surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The company has a trailing four-quarter earnings surprise of roughly 8.3%, on average. The Zacks Consensus Estimate for third-quarter earnings stands at $1.86. DD’s third-quarter results are likely to be supported by its innovation-driven investment, productivity actions and the contributions of acquisitions. Continued strength in healthcare, aerospace and electric vehicles is expected to aid its performance. The benefits of its structural cost actions and strategic price increases should reflect on its performance. DD continues to implement strategic price increases in the wake of raw material and energy cost inflation.
Huntsman has an Earnings ESP of +36.14% and carries a Zacks Rank #3. It is slated to report on Nov. 2.
Huntsman beat the Zacks Consensus Estimate in two of the trailing four quarters and missed twice. The company has a trailing four-quarter negative earnings surprise of roughly 9.4%, on average. The Zacks Consensus Estimate for third-quarter earnings stands at 7 cents. HUN is expected to benefit from higher sales volumes across its segments and pricing actions. It remains focused on additional price increases and cost-reduction initiatives to offset rising and volatile energy and crude oil-related costs, particularly in Europe. Benefits of these actions are expected to reflect on its performance.
View the Zacks #1 Rank List
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4 Chemical Stocks Set to Pull Off a Beat This Earnings Season
Chemical companies’ third-quarter results are expected to reflect recovering demand in key markets and the end of customer inventory destocking. Improved demand in automotive and a rebound in construction end markets are likely to have supported their performance. The results of chemical makers are also likely to have been aided by effective self-help actions, including pricing, cost-saving and productivity improvement initiatives. However, persistently high input, supply chain and logistics costs are likely to have been deterrents.
We have handpicked a few chemical companies — Avient Corporation (AVNT - Free Report) , Air Products and Chemicals, Inc. (APD - Free Report) , DuPont de Nemours, Inc. (DD - Free Report) and Huntsman Corporation (HUN - Free Report) — which are set to beat earnings estimates this earnings season.
How Have Things Shaped Up for Chemical Stocks?
Companies in the chemical space are expected to have benefited from an uptick in demand in certain major markets. The chemical industry bore the brunt of a demand slowdown and continued customer inventory de-stocking last year. 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. Global electronics demand cooled amid high inflation, elevated interest rates and cautious consumer behavior.
The automotive sector represents a crucial end market for chemical manufacturers. A decline in global vehicle production last year weighed on demand from this segment. Elevated interest rates, coupled with economic slowdown concerns and tariff-related uncertainties, further pressured the market. Demand for chemicals in automotive has been healthy this year, supported by accelerating electric vehicle adoption, especially in Asia and Europe. Better affordability, robust demand for hybrid models and aggressive promotional incentives are expected to lift new vehicle sales. As production picks up, the recovery momentum is likely to continue.
Chemical companies are also seeing signs of a recovery in demand across the construction and electronics markets. Demand in healthcare and packaging markets also remains steady. On a further positive note, customer inventory destocking in building & construction and consumer durables has largely ended, leading to low inventory levels. This is expected to have led to an uptick in chemical demand and volumes.
Also, the benefits of strategic 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 in the third quarter.
Partly offsetting these tailwinds, chemical makers are likely to have faced challenges from raw-material and energy-cost inflation and supply-chain and freight-transportation disruptions. Tariffs have led to increased costs for raw materials, resulting in higher production expenses for the industry players. Moreover, the Middle East conflict and the blockade of the Strait of Hormuz have led to significant supply disruptions and feedstock cost pressure. The impacts of inflationary pressures are expected to be reflected in the margins of chemical specialty companies in the September quarter.
Expectations for Q3
The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the Zacks sectors that are expected to see double-digit growth in earnings for the third quarter. Overall earnings for the space are projected to increase 34.2% on 6.8% 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 four chemical stocks that have the right combination of elements to pull off an earnings surprise this time around:
Avient has an Earnings ESP of +0.58% and carries a Zacks Rank #2. The company is scheduled to report on Nov. 4.
Avient surpassed the Zacks Consensus Estimate in each of the trailing four quarters at an average of 3.4%. The Zacks Consensus Estimate for earnings is pegged at 81 cents. AVNT is likely to have gained from the strength in sustainable solutions, cost-reduction actions and new business wins. Its mix toward defense, healthcare, telecom and chip packaging continues to support margins. Price/mix and productivity are expected to have contributed to margin expansion. Strong packaging and Asia momentum and healthy defense demand are likely to support results.
Avient Corporation Price and EPS Surprise
Avient Corporation price-eps-surprise | Avient Corporation Quote
Air Products has an Earnings ESP of +0.44% and carries a Zacks Rank #3. The company is scheduled to report on Nov. 5. You can see the complete list of today’s Zacks #1 Rank stocks here.
Air Products has beaten the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The company has a trailing four-quarter negative earnings surprise of roughly 2.9%, on average. The Zacks Consensus Estimate for fiscal fourth-quarter earnings stands at $3.60. APD’s strategic investments in high-return projects, new business deals and acquisitions are expected to support its results. Favorable pricing and higher on-site volumes are likely to drive its top line. APD is also expected to have benefited from its productivity actions.
Air Products and Chemicals, Inc. Price and EPS Surprise
Air Products and Chemicals, Inc. price-eps-surprise | Air Products and Chemicals, Inc. Quote
DuPont has an Earnings ESP of +1.35% and carries a Zacks Rank #3. It is slated to report on Nov. 3.
DuPont surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The company has a trailing four-quarter earnings surprise of roughly 8.3%, on average. The Zacks Consensus Estimate for third-quarter earnings stands at $1.86. DD’s third-quarter results are likely to be supported by its innovation-driven investment, productivity actions and the contributions of acquisitions. Continued strength in healthcare, aerospace and electric vehicles is expected to aid its performance. The benefits of its structural cost actions and strategic price increases should reflect on its performance. DD continues to implement strategic price increases in the wake of raw material and energy cost inflation.
DuPont de Nemours, Inc. Price and EPS Surprise
DuPont de Nemours, Inc. price-eps-surprise | DuPont de Nemours, Inc. Quote
Huntsman has an Earnings ESP of +36.14% and carries a Zacks Rank #3. It is slated to report on Nov. 2.
Huntsman beat the Zacks Consensus Estimate in two of the trailing four quarters and missed twice. The company has a trailing four-quarter negative earnings surprise of roughly 9.4%, on average. The Zacks Consensus Estimate for third-quarter earnings stands at 7 cents. HUN is expected to benefit from higher sales volumes across its segments and pricing actions. It remains focused on additional price increases and cost-reduction initiatives to offset rising and volatile energy and crude oil-related costs, particularly in Europe. Benefits of these actions are expected to reflect on its performance.
Huntsman Corporation Price and EPS Surprise
Huntsman Corporation price-eps-surprise | Huntsman Corporation Quote