The United States chemicals industry has achieved a strong recovery since last year. Despite anticipated pressures from raw material cost inflation for the first half, strong demand for commodity and specialty chemicals is expected to keep prices up this year. Furthermore, U.S. chemical volumes are forecasted to increase by 3% in 2022.
In addition, according to BASF, global chemical production (excluding pharmaceuticals) is predicted to grow by 3.5% in 2022, which is above average for the years prior to the COVID-19 pandemic. Also, the global basic chemicals market is expected to grow at a 4.1% CAGR to $943 billion by 2030.
Given this backdrop, we think the stocks of fundamentally strong chemical companies Chemours Company (CC), Westlake Corporation (WLK), and Univar Solutions Inc. (UNVR) might be solid bets now.
Chemours Company (CC)
CC operates as a performance chemical provider in several regions. The Wilmington, Del. company operates through Titanium Technologies; Thermal & Specialized Solutions; Advanced Performance Materials; and Chemical Solutions segments.
On May 11, CC announced its participation in fundraising for Versogen Inc., a company that is developing anion exchange membrane (AEM) technology for use in hydrogen production. Denise Dignam, President, Advanced Performance Materials for CC, said, "We’re excited to participate in Versogen to help power their continued scale-up and to have the opportunity to collaborate with a start-up in our backyard to understand better the synergies between AEM technology and our Nafion™ ion exchange membranes in green hydrogen production."
On April 27, CC declared a $0.25 per share quarterly dividend for the second quarter of 2022. The dividend is payable on June 15 and reflects the company’s ability to pay back its shareholders.
For its fiscal first quarter, ended March 31, CC’s net sales increased 22.8% year-over-year to $1.76 billion. Its adjusted EBITDA rose 50.4% from the prior-year quarter to $403 million. And its adjusted net income and adjusted EPS improved 99.2% and 105.6%, respectively, from the same period in the prior year to $239 million and $1.46.
The $1.41 consensus EPS estimate for the quarter ending June 30, 2022, indicates a 17.5% year-over-year increase. Likewise, the $1.83 billion consensus revenue estimate for the same quarter reflects a 10.3% increase from the prior-year period. Furthermore, CC has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 26.4% in price over the past three months and 13% year-to-date to close yesterday’s trading session at $37.92.
CC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating , which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CC has a Value grade of A and a Growth and Quality grade of B. In the 89-stock Chemicals industry, it is ranked #6. The industry is rated A.
Click here to see the additional POWR Ratings for CC (Momentum, Stability, and Sentiment).
Westlake Corporation (WLK)
WLK in Houston, Tex., formerly known as Westlake Chemical Corporation, is a petrochemical, polymer, and building products provider. The company operates through the two broad segments of Performance and Essential Materials and Housing and Infrastructure Products.
On May 2, WLK company Westlake Pipe & Fittings Inc. announced the change in its name from NAPCO Pipe & Fittings to reflect WLK’s brand equity. In addition, , the company announced that its acquisition of LASCO Fittings, Inc., has allowed it to provide a broader portfolio of injection-molded fittings to its existing market segments and expand into new market segments.
On April 5, Westlake Akishima, a Tokyo-based supplier of specialty stabilizers for the PVC industry, introduced its new e-commerce platform, built by Agilis Chemicals to support fast product search, order placement, and reorders. The introduction is expected to benefit the company.
WLK’s net sales increased 72.1% year-over-year to $4.06 billion in its fiscal first quarter, ended March 31, 2022. Its net income attributable to WLK improved 212.4% from the prior-year period to $756 million. Its earnings per common share attributable to WLK were $5.83, up 211.8% from the prior-year quarter.
Analysts expect WLK’s EPS to increase 47.8% year-over-year to $5.97 for the quarter ending June 30, 2022. Also, the Street expects its revenue for the same quarter to rise 55% from the same period the prior year to $4.15 billion. In addition, WLK has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 26.1% in price and 31% year-to-date to close yesterday’s trading session at $127.19.
It’s no surprise that WLK has an overall B rating, which translates to Buy in our POWR Rating system.
WLK has an A grade for Sentiment and a B grade for Value and Quality. It is ranked #19 in the Chemicals industry.
To see the additional POWR Ratings for Growth, Momentum, and Stability for WLK, click here.
Univar Solutions Inc. (UNVR)
UNVR in Downers Grove, Ill., engages in the distribution of commodity and specialty chemical products and provides related services globally. The company’s offerings include epoxy resins, polyurethanes, ingredients for cleaners, detergents, disinfectant products, and performance-enhancing additives for lubricants and metalworking fluids.
On May 11, UNVR announced that it would install 1020kW of solar capacity and an ESS with a total energy capacity of 375kW/753kWh at its City of Commerce, Calif., facility in partnership with Motive Energy. The company expects to reduce emissions and costs at its major facility and aligns with its net-zero commitment.
On April 12, UNVR announced the expansion of its specialty ingredient portfolio in Mexico and Brazil through its distribution agreement with specialty ingredients company Ashland. This might prove to be profitable for the company.
For the fiscal first quarter, ended March 31, 2022, UNVR’s net sales increased 33.7% year-over-year to $2.88 billion. Its operating income improved 219.2% from the same period in the prior year to $258.90 million. Its adjusted net income and adjusted EPS came in at $183.40 million and $1.07, respectively, up 149.2% and 148.8% from the prior-year period.
The Street’s EPS $0.91 estimate for the quarter ending June 30, 2022, reflects a 59.6% year-over-year improvement. The Street’s $2.92 billion revenue estimate for the same quarter indicates a 28.7% improvement from the prior-year period. UNVR has beaten the consensus EPS estimates in each of the trailing four quarters.
UNVR’s shares have gained 7.5% in price over the past year to close yesterday’s trading session at $27.18.
This promising prospect is reflected in UNVR’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
UNVR has a Growth, Value, and Sentiment grade of B. It is ranked #15 in the Chemicals industry.
In addition to the POWR Rating grades we’ve stated above, one can see UNVR ratings for Momentum, Stability, and Quality here.
CC shares were trading at $39.52 per share on Friday morning, up $1.60 (+4.22%). Year-to-date, CC has gained 18.81%, versus a -15.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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