Chemical stocks have been witnessing a sharp rebound from the pandemic’s negative effects since last year. Notably, an inflationary environment in the United States and the rapid rebound of global industrial and agricultural activity have been significant factors pushing chemical prices higher.
Though chemical companies are dealing with rising raw material costs and higher supply chain and logistical expenses, steps to raise chemical product selling prices to offset cost inflation and supply chain tightness, productivity improvement measures, and operational efficiency improvements helped the chemical industry to maintain its margins through the second half of 2021.
Therefore, even if inflation keeps trending higher, we think it could be wise to bet on fundamentally-sound chemicals stocks Olin Corporation (OLN), The Chemours Company (CC), and FMC Corporation (FMC). They possess impressive growth attributes.
Olin Corporation (OLN)
OLN in Clayton, Miss., produces and sells chemical products in the United States, Europe, and globally. It operates in three segments: Chlor Alkali Products and Vinyls; Epoxy; and Winchester. The company markets its products through its sales personnel as well as directly to various industrial clients, mass merchants, retailers, wholesalers, other distributors, and the United States Government and its prime contractors.
OLN’s board of directors authorized a new $1.0 billion share buyback program in November. Under the program, shares of the company’s common stock may be repurchased periodically, either on the open market or in privately negotiated deals. This exhibits the company’s robust cash flow generating capabilities.
OLN’s net sales increased 62.8% year-over-year to $2.34 billion in the third quarter, ended Sept. 30, 2021. Its operating income came in at $549 million, versus a $683.8 million operating loss in the prior-year quarter. The company reported $390.7 million in net income, compared to a $736.8 million net loss in the third quarter of 2020. Its EPS was $2.38 over this period.
The company’s EPS is expected to grow 878.4% year-over-year to $8.64 in its fiscal 2021. Analysts expect OLN’s revenue to increase 53.3% year-over-year to $8.83 billion in fiscal 2021. The stock has gained 89.8% in price over the past year and 27% over the past nine months.
OLN’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
OLN is also rated B for Growth, Momentum, and Value. Within the A-rated Chemicals industry, it is ranked #11 of 89 stocks. To see additional POWR Ratings for Quality, Stability, and Sentiment for OLN, click here.
Note that OLN is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
The Chemours Company (CC)
CC in Wilmington, Del., offers performance chemicals across North America, Asia Pacific, Europe, the Middle East, Africa, and Latin America. Titanium Technologies; Thermal & Specialized Solutions; Advanced Performance Materials; and Chemical Solutions are its four operational segments. The company offers its products both directly and through a network of resellers and distributors.
In November, CC launched GlycleanTM D, a proven broad-spectrum disinfectant and cleaner that has been registered with the U.S. Environmental Protection Agency (EPA) to deactivate the SARS-CoV-2 virus as well as other viruses and bacteria.
During the third quarter, ended Sept. 30, 2021, CC’s net sales increased 36.3% year-over-year to $1.68 billion. Its gross profit grew 66.1% from its year-ago value to $427 million, while its net income surged 181.6% year-over-year to $214 million over this period. The company’s EPS increased 176.1% from its year-ago value to $1.27.
A $4.11 consensus EPS estimate for its fiscal 2021 represents a 107.6% improvement year-over-year. Analysts expect CC’s revenue to increase 27.6% year-over-year to $6.34 billion in its fiscal 2021. The stock has gained 21.1% in price over the past year and 9.5% over the past month.
CC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Value and a B for Growth and Quality. In the Chemicals industry, it is ranked #12.
In total, we rate CC on eight distinct levels. Beyond what we have stated above, we have also given CC grades for Stability, Momentum, and Sentiment. Get all the CC ratings here.
FMC Corporation (FMC)
FMC specializes in agricultural sciences and offers crop protection, plant health, precision agriculture, and professional pest and turf management solutions. The Philadelphia, Pa.-based concern provides its products to farmers directly and through individual distributors and co-ops, national and regional distributors, and national and regional distributors.
Last month, FMC signed multi-year agreements with Corteva Agriscience to supply Rynaxypyr and Cyazypyr actives for seed treatment products. These multi-year agreements expand the two companies’ current global relationship.
For the third quarter, ended Sept.30, 2021, FMC’s revenue increased 10.1% year-over-year to $1.19 billion. Its net income grew 41.7% from its year-ago value to $157.9 million, while its EPS increased 43.5% year-over-year to $1.22. In addition, the company’s adjusted EBITDA surged 12%from the prior-year quarter to $293 million.
Analysts expect FMC’s revenue to increase 7.8% year-over-year to $5 billion in fiscal 2021. In addition, the company’s EPS is expected to grow 10% in fiscal 2021. Over the past month, the stock has gained 6.9% in price. Also, it has returned 17.6% over the past three months.
FMC’s POWR Ratings reflect this promising outlook. The company has an overall B, which translates to Buy in our proprietary rating system. FMC is also rated B grade for Quality, Growth, and Sentiment. Within the Chemicals industry, it is ranked #19.
Click here to see additional POWR Ratings for Stability, Value, and Momentum for FMC.
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OLN shares were trading at $49.08 per share on Friday morning, down $1.07 (-2.13%). Year-to-date, OLN has declined -14.67%, versus a -6.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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