The chemical industry was hard hit by last year’s COVID-19 pandemic-fueled disruptions. However, the American Chemistry Council (ACC) reported that U.S. chemical production expanded in 2021, thanks to a post-lockdown spending surge that boosted demand for chemicals and other goods and materials.
With diverse uses for chemicals—ranging from assisting in the preservation and flavoring of foods to the production of soaps and increasing chemical usage in the automotive and construction industries—the industry is expected to grow substantially in the coming months. U.S. chemical volumes are expected to grow 3.2%. And capital spending in the chemistry industry is expected to rise by 3.1% in 2022.
Given this backdrop, we think it could be wise to bet on fundamentally strong chemical stocks LyondellBasell Industries N.V. (LYB), Westlake Chemical Corporation (WLK), Huntsman Corporation (HUN), and The Chemours Company (CC).
LyondellBasell Industries N.V. (LYB)
LYB in Rotterdam, the Netherlands, operates as a plastic, chemicals, and refining company in the United States, Germany, Italy, France, Japan, China, and internationally. The company operates in Olefins and Intermediates and Derivatives; Advanced Polymer Solutions; Refining, and three other segments. LYB’s chemicals businesses consist of processing plants and other chemicals.
LYB’s revenues increased 87.4% year-over-year to $12.7 billion for the third quarter, ended September 30, 2021. The company’s net income grew 1,445.6% from its year-ago value to $1.76 billion. Its EPS rose 1,490.0% from its year-ago value to $5.25. And the company’s EBITDA increased 477.5% year-over-year to $2.69 billion.
Analysts expect LYB’s revenue to increase 62.8% year-over-year to $45.17 billion in fiscal 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Its EPS is estimated to grow 235.7% in the current year.
LYB’s strong fundamentals are reflected in its POWR Ratings. The stock 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.
Also, the stock has an A grade for Value. We have also graded LYB for Sentiment, Stability, Growth, Momentum, and Quality. Click here to access all LYB’s ratings. LYB is ranked #41 of 89 stocks in the A-rated Chemicals industry.
Westlake Chemical Corporation (WLK)
WLK in Houston, Tex., is a global manufacturer and supplier of petrochemicals, polymers, and building products. The company operates through two segments, Vinyls and Olefins. WLK offers its products to chemical processors, plastics fabricators, small construction contractors, municipalities, and supply warehouses in various consumer and industrial markets.
This month, North American Pipe Corporation (NAPCO), a subsidiary of WLK, launched a molecular-oriented PVC (PVCO) pipe. The new PVCO pipe should have a lower manufacturing carbon footprint than other water main materials. The company’s investment in state-of-the-art technology should also expand NAPCO’s production capacity at the company’s Woodbridge, Ontario, pipe, and fittings facility.
During the third quarter, ended September 30, 2021, WLK’s net sales increased 61% year-over-year to $3.06 billion. The company’s gross profit grew 310.5% from its year-ago value to $1.02 billion. Its income from operations rose 989.9% from the prior-year quarter to $861 million, and the company’s net income increased 798.6% year-over-year to $620 million.
WLK’s revenue is expected to increase 50.4% year-over-year to $11.28 billion in fiscal 2021. The company has surpassed the consensus EPS in each of the trailing four quarters. Its EPS is estimated to grow 559.5% in the current year. The stock has gained 13.3% in price year-to-date.
WLK’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has a B grade for Growth, Value, and Quality.
Huntsman Corporation (HUN)
The global chemicals company HUN, which is headquartered in Salt Lake City, Utah, operates in four segments: Polyurethanes; Performance Products; Advanced Materials; and Textile Effects. The company’s products are used in a range of applications, including adhesives, aerospace, automotive, construction products, electronics, insulation, medical, construction, power generation, and refining.
In September, HUN and KPX Chemical, a polyols producer for polyurethanes in Korea, formed a joint venture named KPX HUNTSMAN POLYURETHANES AUTOMOTIVE CO., LTD. (KHPUA). The joint venture should provide innovative polyurethane system solutions to Korean automakers. And KHPUA should also enable downstream polyurethanes businesses to develop more sustainably, both economically and environmentally.
HUN’s revenues in the third quarter, ended September 30, 2021, increased 51.3% year-over-year to $2.29 billion. The company’s net income grew 294.7% from its year-ago value to $225 million. Its EPS rose 327.3% from the prior-year quarter to $0.94, and its adjusted EBITDA increased 97.3% year-over-year to $371 million.
Analysts expect HUN’s revenue to increase 37.5% year-over-year to $8.27 billion in fiscal 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is estimated to grow 256.1% in the current year. HUN’s stock price has surged 28.9% year-to-date.
It is no surprise that HUN has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has a B grade for Value and Sentiment.
Note that HUN is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
The Chemours Company (CC)
CC is a Wilmington, Del.-based chemicals company that operates through Titanium Technologies; Thermal & Specialized Solutions; Advanced Performance Materials; and Chemical Solutions segments. The company’s product portfolio ranges from automotive, paints, and plastics to electronics, construction, energy, and telecommunications. CC provides performance chemicals in North America, the Asia Pacific, Europe, the Middle East, Africa, and Latin America.
In November, CC launched Glyclean D, a proven broad-spectrum disinfectant and cleaner registered with the U.S. Environmental Protection Agency (EPA). This disinfectant can be used to deactivate the SARS-CoV-2 virus and other viruses and bacteria.
For the third quarter, ended September 30, 2021, CC’s net sales increased 36.3% year-over-year to $1.68 million. The company’s gross profit grew 66.1% from its year-ago value to $427 million. Its net income rose 181.6% from the prior-year quarter to $214 million. Also, the company’s EPS increased 176.1% year-over-year to $1.27.
Analysts expect CC’s revenue to increase 26.9% year-over-year to $6.31 billion in its fiscal 2021. The company has surpassed the consensus EPS in each of the trailing four quarters. Its EPS is estimated to grow 107.6% in the current year. And the stock has gained 15.9% in price over the past nine months and 29.8% year-to-date.
CC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Value and a B grade for Growth and Quality.
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LYB shares were trading at $90.19 per share on Thursday morning, up $2.17 (+2.47%). Year-to-date, LYB has gained 2.74%, versus a 27.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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