Increased demand and adoption of AI solutions are expected to drive growth in the chemical industry. Therefore, investors could consider quality chemical stocks CSW Industrials, Inc. (CSWI), Orion S.A. (OEC), and Oil-Dri Corporation of America (ODC).

The chemical industry enjoys strong demand from various sectors, such as automotive, agriculture, construction, healthcare, and electronics. The global chemicals market is expected to reach $6.85 trillion by 2027, growing at a CAGR of 7.8%.

In addition, the increasing per capita disposable income and change in consumer preferences have improved demand for end-user industries such as pharmaceuticals, agrochemicals, and home/personal care products. This has led to a rise in demand for specialty chemicals.

The global specialty chemicals market is forecasted to grow to $998.94 billion by 2028, expanding at a CAGR of  5%.

Moreover, the adoption of cutting-edge digital techniques by chemical industries, the rising demand for better batch production scheduling, and increased awareness of AI solutions are boosting the growth of the chemical industry.

Take a look at the stocks mentioned above:

CSW Industrials, Inc. (CSWI)

CSWI operates as a diversified industrial company in the United States and internationally. It operates through three segments, Contractor Solutions; Engineered Building Solutions; and Specialized Reliability Solutions.

CSWI’s trailing-12-month gross profit margin of 41.99% is 40.7% higher than the 29.83% industry average. Its trailing-12-month net income margin of 12.72% is 100.5% higher than the 6.35% industry average.

On July 14, 2023, CSWI announced a quarterly dividend of $0.19, payable on August 11, 2023.

CSWI pays $0.76 annually as dividends which translates to a yield of 0.46% at the current price. Its four-year average dividend yield is 0.54%. Its dividend payouts have grown at 9% CAGR over the past three years.

During the fiscal fourth quarter that ended March 31, 2023, CSWI’s net revenues increased 12.9% year-over-year to $195.69 million. Its adjusted net income increased 46.7% year-over-year to $27.06 million, and its adjusted net EPS attributable to CSWI came in at $1.74, representing a 48.7% increase over the prior-year quarter.

Analysts expect CSWI’s revenue for the fiscal first quarter ended June 2023 to increase 6.8% year-over-year to $213.50 million. Its EPS is expected to increase 2.4% year-over-year to $1.93 for the same quarter. Also, it has surpassed EPS and revenue in three of the trailing four quarters, which is impressive.

Shares of CSWI have gained 60.8% over the past year to close the last trading session at $169.83.

CSWI’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an A grade for Sentiment and a B in Momentum and Quality. It is ranked #9 out of 85 stocks in the Chemicals industry.

Beyond what is stated above, we’ve also rated CSWI for Growth, Value, and Stability. Get all CSWI ratings here.

Orion S.A. (OEC)

Headquartered in Senningerberg, Luxembourg, OEC manufactures and sells carbon black products in Luxembourg and internationally. It operates in two segments, Specialty Carbon Black; and Rubber Carbon Black.

OEC’s trailing-12-month return on common equity of 27.67% is 159.1% higher than the 10.68% industry average. Its trailing-12-month asset turnover ratio of 1.12x is 50.3% higher than the 0.74x industry average.

On June 8, 2023, OEC declared an interim dividend of $0.0207 per common share of the company, payable on October 5, 2023. The company pays an annual dividend of $0.08, which translates to a yield of 0.37% at the current price level. It has a four-year average dividend yield of 2.13%.

OEC’s adjusted EBITDA for the fiscal first quarter ended March 31, 2023, increased 21.5% year-over-year to $101.10 million. Its adjusted net income increased 30.7% year-over-year to $45.10 million. The company’s gross profit increased 15.7% year-over-year to $136.40 million, and its net EPS came in at $0.74, representing a 29.8% increase over the prior-year quarter.

OEC’s EPS and revenue for the fiscal quarter ending September 30, 2023, are expected to increase 2.3% and 2.7% year-over-year to $0.58 and $557.49 million, respectively. It has an impressive earnings surprise history, surpassing its consensus EPS and revenue estimates in three of the trailing four quarters.

Over the past nine months, OEC has gained 52.5% to close the last trading session at $22.57.

OEC’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It has a B grade for Value. It is ranked #10 in the same industry.

Click here to see the other ratings of OEC for Growth, Momentum, Stability, Quality, and Sentiment.

Oil-Dri Corporation of America (ODC)

ODC develops, manufactures, and markets sorbent products in the United States and internationally. It operates in two segments, Retail and Wholesale Products Group, and Business to Business Products Group.

On June 29, 2023, ODC announced that it would implement price increases on its industrial and automotive clay absorbents, effective September 1, 2023. Depending on the products, these price increases will range from 10% to 15%.

ODC’s trailing-12-month net income margin of 5.72% is 81.4% higher than the 3.16% industry average. Its trailing-12-month EBITDA margin of 12.66% is 27.6% higher than the 9.92% industry average.

The company pays an annual dividend of $1.16, which translates to a yield of 1.87% at the current price level. It has a four-year average dividend yield of 3.13%.

ODC’s net sales increased 22.9% year-over-year to $105.43 million in the fiscal third quarter, which ended April 30, 2023. Its net income came in at $8.49 million, compared to a loss of $2.13 million in the previous-year quarter. Also, its net income share came in at $0.95, compared to negative $0.24 in the previous-year quarter.

The stock has gained 126.8% over the past nine months to close the last trading session at $62.08.

ODC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

ODC also has an A grade for Growth. It is ranked #6 in the same industry.

To access ODC’s additional POWR Ratings for Sentiment, Momentum, Value, Stability, and Quality, click here.

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CSWI shares were trading at $169.50 per share on Wednesday morning, down $0.33 (-0.19%). Year-to-date, CSWI has gained 46.61%, versus a 19.97% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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