NEU: 3 Specialty Chemical Stocks Driving Industrial Growth

The specialty chemical industry is becoming a cornerstone of industrial innovation, offering tailored solutions across multiple sectors like construction, automotive, and electronics. The companies in this sector focus on producing high-performance chemicals that enhance product quality and efficiency.

Given this industry’s tailwinds, investors could scoop up shares of three fundamentally strong specialty chemical stocks: Innospec Inc. (IOSP), Kronos Worldwide, Inc. (KRO), and NewMarket Corporation (NEU) for long-term growth.

The automotive and electronics industries are two major beneficiaries of specialty chemicals. Lightweight materials for Electric Vehicles (EVs) and advanced adhesives for semiconductors highlight the critical role these chemicals industry play in innovation. With the EV market expanding rapidly, chemical firms supplying this sector are poised for robust growth.

Sustainable and eco-friendly products play a key role in industries worldwide. The specialty chemicals companies are evolving as they are investing heavily in green technologies, producing biobased chemicals and low-emission and recyclable materials. This aligns with stricter environmental regulations and a global push toward sustainability, creating a long-term growth runway.

The global specialty chemicals market is anticipated to reach $914.4 billion by 2030, exhibiting a CAGR of 5.2%.

Considering these encouraging trends, let’s take a look at the fundamentals of the three best Chemicals industry stocks, beginning with the third choice.

Stock #3: Innospec Inc. (IOSP)

IOSP develops, manufactures, blends, markets, and supplies a wide range of specialty chemicals to customers internationally. The company operates through three segments: Performance Chemicals; Fuel Specialties; and Oilfield Services.

2024 STOCK MARKET OUTLOOK

On November 26, the company paid a semi-annual dividend of $0.79 per common share. With 10 years of consecutive dividend growth, IOSP pays an annual dividend of $1.58, which translates to a yield of 1.42% at the current share price. Also, the company’s dividend payouts have increased at CAGRs of 8.7% and 10.1% over the past five and three years, respectively.

In the nine-month period that ended on September 30, 2024, IOSP’s net sales were reported to be $1.38 billion. The company reported operating income of $136.80 million, indicating a 16.8% growth from the year-ago value. Its net income came in at $106 million, and its EPS stood at $4.22, up 4.6% and 4.2% year-over-year, respectively. Also, the company’s adjusted EBITDA grew 9.2% from the prior-year period to $168.60 million.

Analysts expect IOSP’s revenue and EPS for the fiscal year (ending December 2024) to be $1.83 billion and $5.88, respectively. For the fiscal year 2025, its revenue is expected to increase 4.1% year-over-year to $1.90 billion, while its EPS is forecasted to settle at $6.26, indicating a 6.5% improvement over the prior year.

Moreover, IOSP’s revenue has grown at CAGRs of 10.7% and 4.3% over the past three and five years, respectively. In addition, its EBIT increased at 14.7% CAGR over the past three years.

IOSP shares have surged 3.3% intraday to close the last trading session at $111.44.

IOSP’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

IOSP has a B grade for Stability, Sentiment, and Quality. It is ranked #13 out of the 81 stocks in the B-rated Chemicals industry. Click here to see the additional ratings for IOSP (Growth, Value, and Momentum).

Stock #2: Kronos Worldwide, Inc. (KRO)

KRO is a global producer and marketer of value-added titanium dioxide pigments, or TiO2, a base industrial product used in a wide range of applications. These pigments are used in coatings, plastics, paper, and specialty products like inks, cosmetics, and pharmaceuticals. The company offers over 50 different TiO2 pigment grades and manufactures iron-based chemicals and specialty chemicals.

On November 29, buoyed by strong financial performance, the company declared its shareholders a quarterly dividend of $0.05 per share. KRO pays an annual dividend of $0.20, which translates to a yield of 2.19% at the current share price. Its four-year average dividend yield is 6.39%.

For the third quarter of 2024, which ended on September 28, KRO’s net sales amounted to $484.70 million, up 22.1% year-over-year. Its EBITDA came in at $123.3 million compared to the year-ago net loss of $12.7 million. The company’s net income stood at $71.80 million compared to the prior-year quarter’s loss of $20.4 million, while its EPS came in at $0.62 versus a loss of $0.18 per share last year.

Street expects KRO’s revenue for the fiscal first quarter (ending March 2025) to increase 11.9% year-over-year to $536.15 million. Its EPS for the same period is expected to register a 115% growth from the prior year, settling at $0.15.

Over the past three and five years, KRO’s revenue income grew at CAGRs of 0.1% and 1.8%, respectively, while its total assets grew at 0.4% CAGR over the past five years.

The stock has gained marginally intraday to close the last trading session at $9.14.

KRO’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has an A grade for Growth and a B for Value and Sentiment. Within the same B-rated industry, it is ranked #9 out of 81 stocks. Click here to see KRO’s ratings for Momentum, Stability, and Quality.

Stock #1: NewMarket Corporation (NEU)

NEU manufactures and sells petroleum additives. The company offers lubricant additives for use in various vehicle and industrial applications, including engine oils, transmission fluids, off-road powertrains, and hydraulic systems.

During the fiscal third quarter, which ended on September 30, 2024, NEU’s net sales increased 8.7% year-over-year, amounting to $724.95 million. The company posted an EBITDA of $212.71 million, indicating 32.6% growth from the prior year’s quarter. NEU’s net income stood at $132.32 million and $13.79, reflecting an increase of 18.9% year-over-year.

NEU’s EBIT has grown at CAGRs of 23.1% and 10.3% over the past three and five years, respectively. Likewise, the company’s levered FCF has increased at a CAGR of 83.7% over the past three years.

Over the intraday, the stock has surged 2.5%, closing the last trading session at $501.25.

NEU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

NEU has a B grade for Growth, Stability, and Quality. It is ranked #4 in the Chemicals industry. Click here to access the additional ratings for NEU (Value, Momentum, and Sentiment).

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NEU shares were trading at $497.38 per share on Wednesday afternoon, down $6.58 (-1.31%). Year-to-date, NEU has declined -5.86%, versus a 1.22% rise in the benchmark S&P 500 index during the same period.