Logistic disruptions have deteriorated this year for U.S. chemical manufacturers, with many companies reporting lost production and surging costs. According to a follow-up survey released by the American Chemistry Council (ACC), transportation-related supply issues have escalated this year, causing severe manufacturing disruptions.
However, the need for basic and essential chemicals across various industries is growing. Also, the government is initiating several policies to ease the industry’s supply issues. This, along with the gradual transition of chemical manufacturing companies to sustainable production with the help of advanced technologies, should help the industry stay in the black. According to Market Reports World, the global chemicals market size is projected to expand at a 2.2% CAGR from 2022 to 2028.
Given this backdrop, we think it could be wise to add the stocks of fundamentally strong chemical companies Huntsman Corporation (HUN), Celanese Corporation (CE), and LyondellBasell Industries N.V. (LYB) to one’s watchlist. These stocks are rated Buy in our POWR Ratings system.
Huntsman Corporation (HUN)
HUN in Salt Lake City, Utah, manufactures and sells differentiated organic chemical products worldwide. The company operates through four segments: Polyurethanes; Performance Products; Advanced Materials; and Textile Effects.
On April 28, 2022, Peter R. Huntsman, Chairman, President, and CEO, said, “We started 2022 with positive momentum and are focused on further improvements through a deliberate value over volume strategy that includes our pricing initiatives, cost optimization programs, organic investments and when appropriate bolt-on acquisitions.”
For the first quarter of its fiscal year 2022, ended March 31, 2022, HUN’s revenues came in at $2.39 billion, up 30% year-over-year. Its adjusted net income was $256 million, up 74.1% year-over-year, while its adjusted EPS came in at $1.19, up 80.3% year-over-year. Also, its adjusted EBITDA was $415 million, up 43.6% year-over-year.
HUN’s revenue is expected to be $9.26 billion in 2022, representing a 9.6% year-over-year rise. The company’s EPS is expected to increase 22.6% year-over-year to $4.34 in 2022. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 32.5% in price to close yesterday’s trading session at $34.44.
It is no surprise that HUN has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. In addition, it has an A grade for Value and a B grade for Growth and Sentiment.
Celanese Corporation (CE)
CE is a technology and specialty materials company based in Irving, Tex., that manufactures and sells high-performance engineered polymers in the United States and internationally. The company operates through three segments: Engineered Materials; Acetate Tow; and Acetyl Chain.
On March 31, 2022, CE completed restructuring the Korea Engineering Plastics Co., a joint venture owned with Mitsubishi Gas Chemical Company, Inc. Tom Kelly, Senior Vice President, CE Engineered Materials, said, “Celanese will benefit from KEP’s technical manufacturing expertise and broad product portfolio that will be marketed using Celanese’s commercial teams, project model and global supply chain network.”
CE’s total net sales increased 41.2% year-over-year to $2.54 billion for the first quarter ended March 31, 2022. Its net earnings came in at $504 million, up 56% year-over-year. Furthermore, its adjusted EPS came in at $5.54, up 60.1% year-over-year.
Analysts expect CE’s revenue to increase 8.6% to $9.87 billion in 2023. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 4.6% in price to close yesterday’s session at $150.34.
CE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
LyondellBasell Industries N.V. (LYB)
LYB operates as a chemical company in the U.S., Germany, Mexico, Italy, Poland, France, Japan, China, the Netherlands, and internationally. The company operates in six segments: Olefins and Polyolefins Americas; Olefins and Polyolefins Europe, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology.
On April 29, 2022, Ken Lane, LYB’s Interim CEO, said, “We launched several collaborations around our Circulen products to develop paint containers for Nippon Paint, cosmetic packaging for L’Occitane and cups for Wendy’s and McDonald’s. LyondellBasell is moving forward on our strategy to deliver sustainable value for customers and shareholders over the coming years.”
LYB’s sales and other operating revenues came in at $13.16 billion for its fiscal 2022 first quarter, ended March 31, 2022, up 44.9% year-over-year. Its net income came in at $1.32 billion, up 23.4% year-over-year, while its EPS was $4.00, up 25.8% year-over-year. In addition, the company’s EBITDA stood at $2.02 billion, up 27.4% year-over-year.
LYB’s revenue is expected to increase 9.5% to $50.56 billion in 2022. Its EPS is expected to grow 1.6% per annum for the next five years. Over the past six months, the stock gained 18.5% in price to close yesterday’s trading session at $110.92.
LYB has an overall B rating, which equates to a Buy in our proprietary rating system. The stock has an A grade for Value and a B grade for Sentiment.
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HUN shares were trading at $34.71 per share on Wednesday morning, up $0.27 (+0.78%). Year-to-date, HUN has gained 0.07%, versus a -12.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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