The global chemical industry has been rebounding quickly since last year, thanks to robust demand for commodity and specialty chemicals for industrial activities. Strong consumer demand and distributor restocking are expected to drive the U.S. chemical industry’s growth this year.
The American Chemistry Council (ACC) expects domestic chemical production to rise 4.3% year-over-year in 2022. ACC chief economist Martha Moore said, “While risks for the global economy remain, the U.S. chemical industry is in a strong position going into 2022.” In addition, the specialty chemicals market is expected to grow at a 3.41% CAGR over the next three years to $155.04 billion by 2025.
With these factors in mind, here are what we think are the top chemical stocks that are well-positioned to capitalize on the growing demand: LyondellBasell Industries N.V. (LYB), Westlake Corporation (WLK), Kronos Worldwide, Inc. (KRO), Hawkins, Inc. (HWKN), and Tredegar Corporation (TG). These companies also pay attractive dividends, making them ideal for fixed-income investors.
LyondellBasell Industries N.V. (LYB)
LYB in Houston, Tex., is a chemical company that operates through six segments: Olefins and Polyolefins-Americas; Olefins and Polyolefins-Europe, Asia, International (O&P-EAI); Intermediates and Derivatives (I&D); Advanced Polymer Solutions; Refining; and Technology. It produces and markets olefins and co-products, polyolefins, polyethylene products, propylene oxide and its derivatives, oxyfuels, and various compounds and solutions.
On February 2, LYB was named in Fortune Magazine’s World’s Most Admired Companies list for the fifth consecutive year. This recognition reflects LYB’s consistently strong performance within the industry.
The company paid a $1.13 quarterly dividend on March 14, 2022. LYB pays $4.52 as dividends annually, yielding 4.4% on the current share price.
In its fiscal year 2021 (ended Dec. 31, 2021), LYB’s sales and other operating revenues increased 66.4% year-over-year to $46.17 billion. Its net income increased 293.6% from its year-ago value to $5.62 billion, while its EBITDA grew 164.5% year-over-year to $8.69 billion. The company’s EPS came in at $16.75, representing a 295% year-over-year improvement.
For its fiscal first quarter (ended March 31, 2022), LYB’s EPS and revenue are expected to increase 11.6% and 32.3%, respectively, year-over-year to $3.58 and $12.01 billion. The stock has gained 11.5% in price over the past three months to close yesterday’s trading session at $102.82.
According to the POWR Ratings, LYB has an A grade for Value. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. The stock is ranked #39 of 89 stocks in the A-rated Chemicals industry.
Click here to see LYB’s additional ratings for Quality, Sentiment, Momentum, Stability, and Growth.
Westlake Corporation (WLK)
WLK is a Houston, Tex.-based global supplier of petrochemicals, polymers, and building products. The company offers products to chemical processors, plastics fabricators, small construction contractors, municipalities, and supply warehouses. It operates through two segments: Performance and Essential Materials; and Housing and Infrastructure Products.
On March 8, WLK announced that Westlake Epoxy received a Platinum rating from EcoVadis for its continued sustainability advancements. This evidences the company’s consistently strong performance in sustainability, attracting ESG investors.
On February 1, WLK acquired Hexion Inc.’s global epoxy business for $1.20 billion in cash. According to WLK president and CEO Albert Chao, the acquisition should significantly expand WLK’s integrated business by adding a leading downstream portfolio of coatings and composite products.
On March 15, 2022, WLK paid a $0.30 per share dividend for the fiscal 2021 fourth quarter. WLK pays $1.19 as dividends annually, yielding 1% at the current price.
WLK’s net sales increased 78.5% year-over-year to $3.51 billion in its fiscal fourth quarter (ended Dec. 31, 2021). Its income from operations grew 390.4% from its year-ago value to $873 million, while its net income improved 437.4% year-over-year to $661 million over the period. The company’s EPS increased 472.4% from the year-ago value to $4.98.
The $4.57 consensus EPS estimate for its fiscal first quarter (ended March 31, 2022) represents a 144.1% improvement year-over-year. The $3.41 billion consensus revenue estimate for the last quarter represents a 44.7% increase from the same period last year. WLK has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
WLK stock has gained 40% in price over the past year.
WLK’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
WLK has a B grade for Growth, Value, and Sentiment. Within the Chemicals industry, it is ranked #12 of 89 stocks.
See additional POWR Ratings for WLK’s Momentum, Stability, and Quality here.
Kronos Worldwide, Inc. (KRO)
Dallas, Tex.-based KRO is a producer and marketer of titanium oxide pigments (TiO2) in Europe, North America, and the Asia Pacific. The company sells its products to domestic and international paint, plastics, decorative laminate, and paper manufacturers under the KRONOS brand.
On March 17, KRO paid a $0.19 quarterly dividend. The company pays $0.76 as dividends annually, yielding 4.9% on the current stock price.
During its fiscal year 2021 fourth quarter (ended Dec. 31, 2021), KRO’s net sales increased 19.5% year-over-year to $496 million. Its income from operations rose 154.9% from the year-ago value to $52 million. Its net income grew 209.8% from the same period last year to $31.60 million, while its EPS came in at $0.28, representing a 211.1% increase year-over-year.
Analysts expect KRO’s revenues to increase 8.4% year-over-year to $504 million in its fiscal first quarter (ended March 31, 2022). Its EPS is expected to increase 64.7% to $0.28 in the about-to-be-reported quarter.
Over the past six months, the stock has gained 25.1% in price to close the last trading session at $15.52.
KRO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. KRO also has an A grade for Value and a B grade for Stability, Sentiment, and Quality. The stock is ranked #3 of 89 stocks in the Chemicals industry.
Click here to see KRO’s additional POWR Ratings for Growth and Momentum.
Hawkins, Inc. (HWKN)
HWKN distributes, blends, and manufactures chemicals and specialty ingredients for various industries. Its offerings range from providing industrial chemicals to multiple industries to chemicals, equipment, and solutions for water treatment, and ingredient processing and formulation to manufacturers through its three segments: Industrial; Water Treatment; and Health and Nutrition. HWKN is based in Roseville, Minn.
On March 31, HWKN increased its term credit facility by $100 million to $250 million for a five-year term. The additional debt should finance the company for future acquisitions and expansion opportunities.
On February 2, HWKN increased its quarterly cash dividend by 8% to $0.14 per share (paid on March 4, 2022), representing a 14% increase. HWKN pays $0.56 as dividends annually, yielding 1.2% on the current share price.
Last December, HWKN acquired NAPCO Chemical Company, Inc. This marked the company’s sixth acquisition in 18 months. With this acquisition, HWKN now has 37 water treatment sites operating in 26 states.
In the third quarter, ended Dec. 26, 2021, HWKN’s net sales increased 31% year-over-year to $187.05 million. Its net income increased 28.8% from the year-ago value to $10.20 million, while its adjusted EBITDA grew 22% year-over-year to $21.69 million. The company’s EPS was $0.48, representing a 30% year-over-year improvement.
Analysts expect HWKN’s revenue for its fiscal year 2022 (ended March 31) to come in at $740.47 million, representing 24.1% year-over-year growth. The Street expects the company’s EPS to increase 22.5% year-over-year to $2.36 in the current year. It has surpassed the consensus EPS estimates in three of the trailing four quarters.
HWKN stock has gained 37% in price over the past year.
The company has an overall B rating, which equates to Buy in our POWR Ratings system. HWKN also has a B grade for Stability and Sentiment. Among the 89 stocks in the Chemicals industry, it is ranked #24.
Click here to see the additional POWR Ratings for HWKN (Growth, Value, Quality, and Momentum).
Tredegar Corporation (TG)
TG is an industrial manufacturer of aluminum extrusions, polyethylene (PE) films, and polyester films in the United States. The Richmond, Va., company operates through three segments: PE Films; Flexible Packaging Films; and Aluminum Extrusions. The company sells its products under the brand names UltraMask, ForceField, Terphane, and Ecophane among various others.
On November 4, TG declared a $0.12 per share quarterly dividend for the fourth quarter, payable today. TG pays $0.48 as dividends annually, yielding 4% on the current share price.
TG’s net sales increased 14.8% year-over-year to $220.99 million in the fourth quarter, ended Dec. 31, 2021. The company’s net income from continuing operations increased 229.9% from its year-ago value to $21.35 million, while its cash and cash equivalents stood at $30.52 million, representing a 157.6% increase year-over-year. TG’s EPS has risen 3,050% from the prior-year quarter to $0.63.
Over the past month, the stock has gained marginally to close yesterday’s trading session at $11.99.
TG’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system. It also has an A grade for Momentum and a B grade for Growth, Value, and Quality. Also, it is ranked #1 of 39 stocks in the Industrial – Manufacturing industry.
In addition to the POWR Ratings grades I have just highlighted, one can see the TG’s ratings for Sentiment and Stability here.
Click here to check out our Industrial Sector Report for 2022
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LYB shares were trading at $102.39 per share on Friday afternoon, down $0.43 (-0.42%). Year-to-date, LYB has gained 12.29%, versus a -4.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...
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