The specialty chemicals market is witnessing steady growth as industries adapt to rising consumer demands. Sectors such as electronics, construction, automotive, and pharmaceuticals rely heavily on these vital chemicals. This surge is reshaping global industry dynamics, driving innovation, and creating new opportunities within the sector.

According to a study by Grand View Research, the global specialty chemicals market is forecasted to reach $914.40 billion by 2030, growing at a CAGR of 5.2%. This growth is a sign of a thriving market, making it an exciting time to explore the opportunities within the sector.

Amid this backdrop, NewMarket Corporation (NEU) stands strong within the specialty chemicals industry owing to its manufacture and sale of petroleum additives. The company also offers lubricant additives for use in various vehicle and industrial applications, including engine oils, transmission fluids, and more.

Shares of NEU declined marginally intraday, closing the last trading session at $497.42.

Now, let us delve deeper into the factors that could shape NEU’s performance in the near future.

Solid Historical Growth

Over the past three years, NEU has demonstrated consistent growth across key financial metrics. Its revenue grew at a CAGR of 6.4%, while EBITDA rose at a 20.3% CAGR. Moreover, operational income (EBIT) expanded at a CAGR of 23.1%. Additionally, NEU’s net income and EPS grew at a CAGR of 21.6% and 26.9%, respectively.

Strong Financials

For the fiscal 2024 third quarter that ended September 30, NEU’s net sales increased 8.7% year-over-year to $724.95 million. Its operating profit grew 28% from the prior year’s quarter to $169.52 million.

Moreover, the company’s net income and EPS both rose 18.9% year-over-year to $132.32 million and $13.79, respectively. As of September 30, 2024, NEU’s total assets amounted to $3.17 billion compared to $2.31 million on December 31, 2023.

High Profitability

NEU’s trailing-12-month gross profit margin of 30.84% is 5.5% higher than the industry average of 29.22%. Its trailing-12-month EBITDA margin stands at 25.40%, 54.8% higher than the industry average of 16.40%.

In addition, the company boasts a trailing-12-month net income margin of 15.57%, which is 213.9% higher than the sector average of 4.96%. Also, the stock’s trailing-12-month levered FCF margin of 13.28% outperforms the industry average of 5.05% by 162.1%.

POWR Ratings Reflects Optimism

NEU’s sound 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. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

NEU has a B grade for Quality, supported by profitability measures that exceed industry benchmarks. Moreover, its B grade in Stability is in line with its 60-month beta of 0.51. In addition, NEU also has a B grade for Growth, which is evident by its impressive historical growth. Within the B-rated Chemicals industry, the stock is ranked #4 out of 81 stocks.

Beyond what is stated above, we have also given NEU grades for Sentiment, Momentum, and Value. Get all NEU ratings here.

Bottom Line

NEU has emerged as a prominent player in the specialty chemicals market, driven by its innovative offerings that cater to numerous industries. With the global economy on an upward trajectory, the demand for specialty chemicals is expected to surge, creating significant growth opportunities for NEU.

What could make NEU particularly appealing to investors is its strong profitability, solid financial health, and low stock volatility, which highlight its resilience. Thus, now could be an opportune moment to consider adding NEU to one’s holdings.

How Does NewMarket Corporation (NEU) Stack Up Against Its Peers?

Although NEU’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit strong POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Chemicals industry:

Nitto Denko Corporation (NDEKY)

Fuchs SE (FUPBY)

Kuraray Co., Ltd. (KURRY)

To explore more A or B-rated Chemicals stocks, click here.

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NEU shares . Year-to-date, NEU has declined -5.85%, versus a 1.58% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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