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4 Chemical Stocks Set to Pull Off a Beat This Earnings Season
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Chemical companies’ second-quarter results are expected to reflect the benefit from an uptick in demand in certain key markets, including consumer durables and building & construction, as the unprecedented customer inventory de-stocking that started in late 2022 and weighed heavily on the industry through the first quarter of 2024 has run its course. The results of these companies are also likely to have been supported by pricing and cost-saving actions and lower raw material costs.
We have handpicked a few chemical companies, DuPont de Nemours, Inc. (DD - Free Report) , Eastman Chemical Company (EMN - Free Report) , Avient Corporation (AVNT - Free Report) and Westlake Corporation (WLK - Free Report) , which are set to beat earnings estimates this earnings season.
How Have Things Shaped Up for These Companies?
The chemical space bore the brunt of the demand slowdown in certain major markets in 2023, which continued through first-quarter 2024. The downturn in the building & construction market and the de-stocking in consumer electronics played spoilsport, leading to demand destruction in these key markets. In North America, uncertainties surrounding the U.S. housing market weighed on building & construction. Notably, the housing market bore the brunt of interest rate hikes last year. The demand slowdown in industrial and consumer durables hurt the volumes of chemical companies.
Lower consumer spending due to inflationary pressures in Europe and a slow recovery in China also impacted demand. Moreover, a slower recovery in economic activities in China following the lifting of the restrictions related to the resurgence in COVID-19 infections hurt chemical demand in that country. The slowdown in Europe, resulting from the war in Ukraine and weaker consumer spending due to high levels of inflation, led to softer demand in that region. Energy and feedstock inflation resulted in reduced industrial production and consumer spending in Europe.
Nevertheless, customer inventory de-stocking has largely ended, leading to low inventory levels. This is expected to have resulted in an uptick in chemical demand and volumes in the second quarter. The de-stocking was primarily driven by high inflation and the lingering impacts of the pandemic that affected customer spending.
Demand for chemicals in the automotive market has picked up, aided by an uptick in automotive production on an improved supply of semiconductors. Moreover, chemical companies are seeing a recovery in demand across the construction and electronics markets. Demand in healthcare and packaging markets also remains steady. Improved demand in major markets is expected to have aided chemical volumes in the quarter to be reported.
The benefits of self-help actions, including actions to raise the selling prices of chemical products, productivity improvement measures and operational efficiency improvement, might also reflect on the performance of the companies in this space. A moderation in raw material and energy costs driven by the easing of supply-chain disruptions is expected to have acted as a tailwind.
Expectations for Q2
The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the sectors that are expected to witness a notable decline in earnings on a year-over-year basis in the second quarter. Overall earnings for the sector are projected to decline 20% on 4.3% 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:
DuPont has an Earnings ESP of +0.52% and carries a Zacks Rank #3. It is slated to report on Jul 31.
DuPont surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The company has a trailing four-quarter earnings surprise of roughly 9%, on average. The Zacks Consensus Estimate for second-quarter earnings stands at 85 cents. DD’s second-quarter results are likely to have been supported by its innovation-driven investment, productivity actions and the acquisition of the Spectrum Plastics Group. The benefits of its structural cost actions and strategic price increases are expected to reflect on its performance.
Eastman Chemical surpassed the Zacks Consensus Estimate in each of the trailing four quarters at an average of 5%. The Zacks Consensus Estimate for second-quarter earnings stands at $1.99. It is expected to have gained from its innovation-driven growth model, operational execution and cost-management actions. Pricing initiatives are also expected to have supported the company’s bottom line. EMN is also likely to have benefited from lower operating costs from its operational transformation program.
Westlake has an Earnings ESP of +6.10% and carries a Zacks Rank #3. The company is expected to report on Aug 1.
Westlake surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missed twice. The company has a trailing four-quarter earnings surprise of roughly 2%, on average. The Zacks Consensus Estimate for earnings is pegged at $1.89. WLK is expected to have benefited from continued strength in its Housing and Infrastructure Products segment aided by healthy volumes in pipe and fittings. Actions to boost profitability through the implementation of structural cost reductions are expected to have supported its margins.
Avient has an Earnings ESP of +0.20% and carries a Zacks Rank #3. The company is slated to report on Aug 6.
Avient surpassed the Zacks Consensus Estimate in three of the trailing four quarters while delivering in-line results on the other occasion. The company has a trailing four-quarter earnings surprise of roughly 6%, on average. The Zacks Consensus Estimate for earnings is pegged at 72 cents. AVNT is likely to have gained from the strength in sustainable solutions, cost-reduction actions and a moderation in raw material costs. It is also expected to have benefited from improving demand in packaging and consumer markets as de-stocking has ended in these major end markets.
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4 Chemical Stocks Set to Pull Off a Beat This Earnings Season
Chemical companies’ second-quarter results are expected to reflect the benefit from an uptick in demand in certain key markets, including consumer durables and building & construction, as the unprecedented customer inventory de-stocking that started in late 2022 and weighed heavily on the industry through the first quarter of 2024 has run its course. The results of these companies are also likely to have been supported by pricing and cost-saving actions and lower raw material costs.
We have handpicked a few chemical companies, DuPont de Nemours, Inc. (DD - Free Report) , Eastman Chemical Company (EMN - Free Report) , Avient Corporation (AVNT - Free Report) and Westlake Corporation (WLK - Free Report) , which are set to beat earnings estimates this earnings season.
How Have Things Shaped Up for These Companies?
The chemical space bore the brunt of the demand slowdown in certain major markets in 2023, which continued through first-quarter 2024. The downturn in the building & construction market and the de-stocking in consumer electronics played spoilsport, leading to demand destruction in these key markets. In North America, uncertainties surrounding the U.S. housing market weighed on building & construction. Notably, the housing market bore the brunt of interest rate hikes last year. The demand slowdown in industrial and consumer durables hurt the volumes of chemical companies.
Lower consumer spending due to inflationary pressures in Europe and a slow recovery in China also impacted demand. Moreover, a slower recovery in economic activities in China following the lifting of the restrictions related to the resurgence in COVID-19 infections hurt chemical demand in that country. The slowdown in Europe, resulting from the war in Ukraine and weaker consumer spending due to high levels of inflation, led to softer demand in that region. Energy and feedstock inflation resulted in reduced industrial production and consumer spending in Europe.
Nevertheless, customer inventory de-stocking has largely ended, leading to low inventory levels. This is expected to have resulted in an uptick in chemical demand and volumes in the second quarter. The de-stocking was primarily driven by high inflation and the lingering impacts of the pandemic that affected customer spending.
Demand for chemicals in the automotive market has picked up, aided by an uptick in automotive production on an improved supply of semiconductors. Moreover, chemical companies are seeing a recovery in demand across the construction and electronics markets. Demand in healthcare and packaging markets also remains steady. Improved demand in major markets is expected to have aided chemical volumes in the quarter to be reported.
The benefits of self-help actions, including actions to raise the selling prices of chemical products, productivity improvement measures and operational efficiency improvement, might also reflect on the performance of the companies in this space. A moderation in raw material and energy costs driven by the easing of supply-chain disruptions is expected to have acted as a tailwind.
Expectations for Q2
The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the sectors that are expected to witness a notable decline in earnings on a year-over-year basis in the second quarter. Overall earnings for the sector are projected to decline 20% on 4.3% 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:
DuPont has an Earnings ESP of +0.52% and carries a Zacks Rank #3. It is slated to report on Jul 31.
DuPont surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The company has a trailing four-quarter earnings surprise of roughly 9%, on average. The Zacks Consensus Estimate for second-quarter earnings stands at 85 cents. DD’s second-quarter results are likely to have been supported by its innovation-driven investment, productivity actions and the acquisition of the Spectrum Plastics Group. The benefits of its structural cost actions and strategic price increases are 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
Eastman Chemical has an Earnings ESP of +0.29% and a Zacks Rank #3. It is slated to report on Jul 25. You can see the complete list of today’s Zacks #1 Rank stocks here.
Eastman Chemical surpassed the Zacks Consensus Estimate in each of the trailing four quarters at an average of 5%. The Zacks Consensus Estimate for second-quarter earnings stands at $1.99. It is expected to have gained from its innovation-driven growth model, operational execution and cost-management actions. Pricing initiatives are also expected to have supported the company’s bottom line. EMN is also likely to have benefited from lower operating costs from its operational transformation program.
Eastman Chemical Company Price and EPS Surprise
Eastman Chemical Company price-eps-surprise | Eastman Chemical Company Quote
Westlake has an Earnings ESP of +6.10% and carries a Zacks Rank #3. The company is expected to report on Aug 1.
Westlake surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missed twice. The company has a trailing four-quarter earnings surprise of roughly 2%, on average. The Zacks Consensus Estimate for earnings is pegged at $1.89. WLK is expected to have benefited from continued strength in its Housing and Infrastructure Products segment aided by healthy volumes in pipe and fittings. Actions to boost profitability through the implementation of structural cost reductions are expected to have supported its margins.
Westlake Corp. Price and EPS Surprise
Westlake Corp. price-eps-surprise | Westlake Corp. Quote
Avient has an Earnings ESP of +0.20% and carries a Zacks Rank #3. The company is slated to report on Aug 6.
Avient surpassed the Zacks Consensus Estimate in three of the trailing four quarters while delivering in-line results on the other occasion. The company has a trailing four-quarter earnings surprise of roughly 6%, on average. The Zacks Consensus Estimate for earnings is pegged at 72 cents. AVNT is likely to have gained from the strength in sustainable solutions, cost-reduction actions and a moderation in raw material costs. It is also expected to have benefited from improving demand in packaging and consumer markets as de-stocking has ended in these major end markets.
Avient Corporation Price and EPS Surprise
Avient Corporation price-eps-surprise | Avient Corporation Quote
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