The U.S. chemical industry has witnessed solid growth in the past few years with robust demand from primary end markets, including construction, health, and safety.

The U.S. chemical sector contributes 21% of GDP to the U.S. economy and has a balance of trade surplus in excess of $20 billion. Both specialist and commodity sectors continue to show robust demand for the industry, which helps to maintain prices stable and profitable throughout the year.

Moreover, according to Deloitte, the chemical industry is in a strong financial position. Furthermore, the global specialty chemicals industry is anticipated to grow at a CAGR of 5.1% from 2023 to 2030.

Given the backdrop, investors might consider buying fundamentally sound chemical stocks Dow Inc. (DOW) and Sisecam Resources LP (SIRE) now.

Dow Inc. (DOW)

DOW provides materials science solutions for packaging, infrastructure, mobility, and consumer applications. It operates through Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials & Coatings segments.

On November 15, 2022, DOW announced a new collaboration with Waste Management Inc. (WM) to improve residential recycling for hard-to-recycle plastic films by allowing consumers in select areas to recycle these materials directly in their curbside recycling. This should be strategically beneficial for the companies and is a step forward for sustainable development.

In terms of forward EV/Sales, DOW is currently trading at 0.85x, 41.9% lower than the industry average of 1.46x. Its forward Price/Sales of 0.63x is 41.3% lower than the industry average of 1.07x. 

DOW’s trailing-12-month net income margin of 9.6% is 8.1% higher than the 8.89% industry average. Its trailing-12-month Levered FCF Margin of 7.42% is 43.87% higher than the 5.16% industry average.

DOW has paid dividends for three consecutive years. Over the last three years, DOW’s dividend payouts have grown at a 10.1% CAGR. Its four-year average dividend yield is 4.65%, and its current dividend translates to a 5.49% yield.

DOW’s total current liabilities came in at $12.32 billion on September 30, 2022, compared to $13.23 billion on December 31, 2021. Also, its long-term debt came in at $12.92 billion compared to $14.28 billion for the previous year.

DOW’s revenue is expected to increase 4.1% year-over-year to $57.23 billion for the yet-to-be-reported fiscal year 2022. It surpassed EPS estimates in all four trailing quarters. Over the past three months, the stock has gained 12.7% to close the last trading session at $51.04.

DOW’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

DOW has an A grade for Value and a B grade for Quality. In the B-rated Chemicals industry, it is ranked #30 out of 91 stocks. Click here for the additional POWR Ratings for Momentum, Sentiment, Stability, Value, and Growth for DOW.

Sisecam Resources LP (SIRE)

SIRE engages in the trona ore mining and soda ash production businesses internationally. It processes trona ore into soda ash, a raw material in flat glass, container glass, chemicals, paper, and other consumer and industrial products.

In terms of trailing-12-month E.V./Sales, SIRE is currently trading at 1.02x, 30.9% lower than the industry average of 1.47x. Its trailing-12-month Price/Sales of 0.60x is 44.1% lower than the industry average of 1.07x.

SIRE’s trailing-12-month EBIT margin of 17.58% is 28.8% higher than the 13.65% industry average. Its trailing-12-month Levered FCF Margin of 6.48% is 25.8% higher than the 5.16% industry average.

Over the last three years, SIRE’s dividend payouts have grown at 10.7% CAGR. While SIRE’s four-year average dividend yield is 7.15%, its current dividend translates to a 9.66% yield.

SIRE’s net sales came in at $190.50 million for the third quarter that ended September 30, 2022, up 40.5% year-over-year. Its operating income came in at $32.8 million, up 295.2% year-over-year. Moreover, its net income came in at $15.40 million, up 108.1% year-over-year. 

Over the past year, the stock has gained 23.6% to close the last trading session at $20.71. 

It’s no surprise that SIRE has an overall A rating, equating to a Strong Buy in our POWR Ratings system.  

It has an A grade for Growth and Quality and a B for Value and Stability. It is ranked first in the same industry. Beyond what is stated above, we’ve also rated SIRE for Sentiment and Momentum. Get all SIRE ratings here.

DOW shares were trading at $52.16 per share on Wednesday afternoon, up $1.12 (+2.19%). Year-to-date, DOW has gained 3.51%, versus a 0.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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