A few chemical companies are lined up to report their quarterly numbers on Aug 7. Per the Zacks Industry classification, the chemical industry is grouped under the broader Basic Materials sector, which is among the Zacks sectors that are expected to record the strongest gains in Q2. Earnings for the sector are projected to surge 58.8%, while revenues are expected to spike 26.1%, per the latest Earnings Preview.
The chemical industry is riding on an upturn in the global economy and strength across major end-use markets such as construction and automotive. Improving fundamentals in the energy space, driven by an upswing in crude oil prices also augur well for the industry.
Chemical makers are also seeing strong demand from the construction and automotive sectors. A rebound in crude oil prices has also led to a recovery in demand for chemicals in the energy market and a favorable pricing environment for chemical products as their prices essentially move in tandem with oil prices.
Chemical companies face certain headwinds including a spike in raw materials costs and softness in agricultural commodity prices. However, strategic measures including productivity improvement, pricing hike actions and portfolio restructuring are likely to drive the performance of chemical makers in Q2. Cost-cutting measures by these companies should continue to yield industry-wide margin improvement. Synergies from acquisitions should also lend support to earnings. Moreover, President Donald Trump’s business-friendly tax reform is a positive for U.S. chemical stocks.
We take a look at three chemical companies that are slated to report their results tomorrow.
Albemarle Corporation (ALB - Free Report) will report Q2 earnings numbers after the bell. The company has an Earnings ESP of -1.91% as the Most Accurate Estimate stands at $1.26 while the Zacks Consensus Estimate is pegged at $1.28. The stock carries a favorable Zacks Rank #3 (Hold) but its ESP makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Albemarle has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 5.5%.
The Zacks Consensus Estimate for revenues for Albemarle for the to-be-reported quarter stands at $799.5 million, reflecting an expected increase of 8.4% from the year-ago quarter.
Albemarle should gain from strength in its Lithium unit in the to-be-reported quarter. The results in the lithium business are likely to get a boost from favorable pricing trends as well as higher volumes in battery grade products. However, its Bromine Specialties division faces headwinds from higher costs of raw materials and freight. Shortage of raw materials in curatives products is also likely to affect margins in its Catalysts unit. (Read more: Can Lithium Help Albemarle Beat Earnings Again in Q2?)
International Flavors & Fragrances Inc. (IFF - Free Report) will report Q2 results after the bell. The company has an Earnings ESP of -0.21%. The Zacks Consensus Estimate for the quarter is pegged at $1.61. It has a Zacks Rank #4 (Sell), which we caution against going into the earnings announcement. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company delivered better-than-expected results in the last four quarters, leading to a positive average earnings surprise of 5.6%.
The Zacks Consensus Estimate for total revenues is pegged at $899.6 million, projecting year-over-year growth of 6.7%.
The Zacks Consensus Estimate for revenues for the Flavors segment is pegged at $443 million for Q2, reflecting an increase of 7% from the year-ago quarter. The same for the Fragrances segment stands at $459 million, representing year-over-year growth of 7%.
The company will likely to gain from acquired businesses as well as its multi-year productivity program. However, a rise in raw material costs as well as higher selling, general and administrative expenses are likely to constrain margins. (Read more: International Flavors Q2 Earnings: What's in Store?)
Versum Materials, Inc. (VSM - Free Report) will report fiscal Q3 results before the bell. The company has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 61 cents. While the stock currently carries a Zacks Rank #3, its ESP makes surprise prediction difficult.
Versum surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average beat of 9.4%.
Revenues for fiscal Q3 are projected to rise 18.4% year over year, as the Zacks Consensus Estimate is currently $344.2 million.
Versum will likely gain from continued strong growth in its Advanced Materials product lines and strong activities in the Delivery Systems & Services segment. Strong demand for capital equipment and continued strength in the semiconductor market augur well for the company.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>