Yahoo Finance 4 Chemical Stocks Poised to Outshine Q1 Earnings Estimates
Chemical companies are expected to have benefited from firm demand across several end-use markets and the benefits of pricing and cost actions to counter continued headwinds from raw material, energy and logistics cost inflation. However, softness in certain markets, including consumer durables and building & construction, and some lingering impacts of customer inventory destocking are likely to have posed as headwinds.
The companies in this space that have reported March-quarter results so far have witnessed volume pressure from demand slowdown resulting from weaker global economic activities and the downturn in Europe amid lingering headwinds from input and energy cost inflation. A number of chemical companies are yet to report their quarterly numbers, including Albemarle Corporation ALB, DuPont de Nemours, Inc. DD, Axalta Coating Systems Ltd. AXTA and LyondellBasell Industries N.V. LYB.
How Have Things Shaped Up for These Companies?
Chemical companies’ first-quarter results are expected to reflect stable demand in several markets and pricing actions. Demand for chemicals in the automotive market remains healthy, further aided by a recovery in automotive production on improved supply of semiconductors. Moreover, demand in packaging and healthcare remains strong. The companies in this space are also seeing a recovery in demand across the aerospace and energy markets. A rebound in drilling activities on the back of an uptick in oil prices has led to the demand recovery in the energy space. However, the slowdown in the building & construction and consumer durables markets is likely to have played spoilsport.
Chemical companies are also expected to have faced margin pressure, resulting from elevated raw material costs. Supply-chain disruptions have led to a spike in raw material costs. The Russia-Ukraine conflict and new lockdowns in China following a resurgence in COVID-19 infections have put further pressure on the global supply chain. Higher energy and gas prices, especially in Europe due to the war in Ukraine, have also pushed up the production costs of chemicals and affected demand in that region. The lingering impacts of these headwinds are likely to reflect on the chemical companies’ first-quarter performance. Unfavorable currency swings driven by a stronger dollar are also likely to have been a drag on their performance.
Nevertheless, the benefits of self-help actions, including actions to raise the selling prices of chemical products to counter the cost inflation and tightness in the supply chain, productivity improvement measures and operational efficiency improvement, might reflect on the results of the companies in this space.
Expectations for Q1
The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the sectors that are expected to witness a decline in earnings on a year-over-year basis in the first quarter. Overall earnings for the sector are projected to decline 36.1% on 10.4% lower revenues, per the latest Earnings Trends report.
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:
Albemarle has an Earnings ESP of +0.80% and carries a Zacks Rank #3. The company is scheduled to report on May 3.
Albemarle surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 15.7%. The Zacks Consensus Estimate for first-quarter earnings is pegged at $6.93, indicating a rise of 191.2% from the prior-year quarter. ALB is likely to have benefited from higher volumes in its lithium business on higher customer demand. Higher lithium prices are also likely to have supported its performance. Its cost-saving and productivity initiatives are also expected to have supported margins.
Albemarle Corporation Price and EPS Surprise
Albemarle Corporation price-eps-surprise | Albemarle Corporation Quote
DuPont has an Earnings ESP of +1.77% and a Zacks Rank #3. It is slated to report on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
DuPont surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The company has a trailing four-quarter earnings surprise of roughly 13.8%, on average. The Zacks Consensus Estimate for first-quarter earnings stands at 81 cents. DD is expected to have gained from healthy underlying demand in a number of end markets, including water and general industrial. Actions to implement strategic price increases in the wake of raw material and energy cost inflation are also likely to have aided its margins. Benefits from innovation and cost synergy savings as well as productivity improvement actions are also expected to reflect on its performance.
DuPont de Nemours, Inc. Price and EPS Surprise
DuPont de Nemours, Inc. price-eps-surprise | DuPont de Nemours, Inc. Quote
Axalta Coating Systems has an Earnings ESP of +4.35% and a Zacks Rank #3. It is scheduled to report on May 2.
Axalta surpassed the Zacks Consensus Estimate in three of the trailing four quarters and delivered in-line results on the other occasion. The company has a trailing four-quarter earnings surprise of roughly 6.8%, on average. The consensus estimate for first-quarter earnings is pegged at 31 cents. AXTA is expected to have benefited from higher average price and improved volumes. The results in its Performance Coatings segment are likely to have been aided by price and product mix benefits. Continued momentum in refinish is expected to have offset weakness in industrial markets. Mobility Coatings sales are also likely to have been driven by a recovery in global automotive production and strong pricing.
Axalta Coating Systems Ltd. Price and EPS Surprise
Axalta Coating Systems Ltd. price-eps-surprise | Axalta Coating Systems Ltd. Quote
LyondellBasell has an Earnings ESP of +1.99% and carries a Zacks Rank #3. It is slated to report on Apr 28.
LyondellBasell surpassed the Zacks Consensus Estimate in three of the trailing four quarters, while missing once. The company has a trailing four-quarter earnings surprise of roughly 1%, on average. The Zacks Consensus Estimate for first-quarter earnings stands at $1.80. LYB’s first-quarter results are likely to reflect the benefits of moderate levels of energy and feedstock prices. It is expected to have witnessed stable demand from consumer packaging, oxyfuels and refining markets. Oxyfuel margins are expected to have remained strong in the first quarter on lower feedstock costs.
LyondellBasell Industries N.V. Price and EPS Surprise
LyondellBasell Industries N.V. price-eps-surprise | LyondellBasell Industries N.V. Quote
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DuPont de Nemours, Inc. (DD) : Free Stock Analysis Report
Albemarle Corporation (ALB) : Free Stock Analysis Report
LyondellBasell Industries N.V. (LYB) : Free Stock Analysis Report
Axalta Coating Systems Ltd. (AXTA) : Free Stock Analysis Report
