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4 Chemical stocks are poised to top Q1 earnings estimates

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Chemical companies should have benefited from firm demand in several end-use markets and the benefits of price and cost measures to counter the continued headwinds of raw material, energy and fuel cost inflation. logistic. However, weakness in some markets, notably consumer durables and building & construction, as well as some lingering effects from customer destocking likely acted as headwinds.

Companies in this space that have reported results for the March quarter so far have witnessed volume pressure from slowing demand resulting from weak global economic activity and slowing Europe in a context of persistent headwinds related to the inflation of input and energy costs. A number of chemical companies have yet to release their quarterly figures, including Albemarle Society ALB, DuPont de Nemours, Inc. NOT A WORD, Axalta Coating Systems Ltd. AXTA and LyondellBasell Industries NV LYB.

How have things evolved for these companies?

Chemical companies’ first-quarter results are expected to reflect stable demand in multiple markets and pricing actions. Demand for chemicals in the automotive market remains healthy, further helped by a recovery in automotive production thanks to improved supply of semiconductors. Furthermore, demand in packaging and health remains strong. Companies in this space are also seeing a recovery in demand in the aerospace and energy markets. A rebound in drilling activity following a rise in oil prices led to the recovery in energy demand. However, the slowdown in the building & construction and durable consumer goods markets likely spoiled the party.

Chemical companies are also expected to have come under pressure on their margins, resulting from high raw material costs. Supply chain disruptions have led to soaring raw material costs. The Russian-Ukrainian conflict and further shutdowns in China following a resurgence in COVID-19 infections have put additional pressure on the global supply chain. Rising energy and gas prices, particularly in Europe due to the war in Ukraine, have also pushed up production costs for chemicals and affected demand in that region. The lingering effects of these headwinds should be reflected in the performance of chemical companies in the first quarter. Adverse currency movements driven by a stronger dollar may also have weighed on their performance.

Nevertheless, the benefits of self-help actions, including actions to increase the selling prices of chemicals to counter cost inflation and tension in the supply chain, measures to improve the productivity and improving operational efficiency, could affect the results of companies in this space.

Expectations for the first trimester

The chemical industry is housed within the broader Zacks Basic Materials sector. Basic materials are among the sectors expected to see lower year-over-year earnings in the first quarter. According to the latest earnings trend report, overall industry earnings are expected to decline 36.1% on revenue down 10.4%.

How to choose the winners?

Given the large number of players operating in the field of chemistry, choosing the right stocks is apparently not an easy task. But our proprietary methodology makes it quite simple. One can whittle the list down with the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive ESP Zacks Earnings. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.

Earnings ESP – the percentage difference between the most accurate estimate and the Zacks Consensus Estimate – is our proprietary methodology for determining which stocks are most likely to generate earnings surprises in their next few months. advertisement. Our research shows that for stocks with this combination, the probability of a positive earnings surprise can be as high as 70%.

Our choices

Below, we list four chemical stocks that have the right combination of elements to pull off a profit surprise this time around:

Albemarle has an earnings ESP of +0.80% and carries a Zacks rank of No. 3. The company is due to report on May 3.

Albemarle has exceeded the Zacks consensus estimate in each of the past four quarters, averaging 15.7%. Zacks’ consensus estimate for first-quarter earnings is pegged at $6.93, indicating a 191.2% increase from the year-ago quarter. ALB likely benefited from higher volumes in its lithium business thanks to higher customer demand. Higher lithium prices are also likely to have supported its performance. Its cost reduction and productivity initiatives should also have supported margins.

Albemarle Corporation Price and EPS Surprise

Albemarle Corporation price-eps-surprise | Quote from Albemarle Corporation

Du Pont has a +1.77% earnings ESP and a No. 3 Zacks rank. Slated to report May 2. You can see the full list of today’s Zacks #1 Rank stocks here.

DuPont has exceeded the Zacks consensus estimate in each of the past four quarters. The company has a four-quarter earnings surprise of around 13.8% on average. Zacks’ consensus estimate for first-quarter earnings is 81 cents. DD should have benefited from healthy underlying demand in a number of end markets, including water and general industry. Actions to implement strategic price increases in the wake of raw material and energy cost inflation are also likely to have helped its margins. The benefits of innovation and cost synergy savings as well as productivity improvement actions should also be reflected in its performance.

DuPont de Nemours, Inc. Price and EPS Surprise

DuPont de Nemours, Inc. Price and EPS Surprise

DuPont de Nemours, Inc. price-eps-surprise | DuPont de Nemours, Inc. Quote

Axalta Coating Systems has a +4.35% win ESP and a #3 Zacks rank. His report is due May 2.

Axalta has exceeded the Zacks consensus estimate in three of the past four quarters and delivered results in line on the other occasion. The company has a four-quarter earnings surprise of around 6.8% on average. The consensus estimate for first-quarter earnings is set at 31 cents. AXTA should have benefited from a higher average price and improved volumes. Results from its Performance Coatings segment were likely helped by price and product mix advantages. Continued momentum in auto repair is expected to have offset weakness in industrial markets. Mobility Coatings sales are also likely to have been driven by a recovery in global automotive production and high prices.

Axalta Coating Systems Ltd. Price and surprise EPS

Axalta Coating Systems Ltd.  Price and surprise EPS

Axalta Coating Systems Ltd. price-eps-surprise | Submission by Axalta Coating Systems Ltd.

LyondellBasell has a +1.99% Earnings ESP and carries a Zacks Rank #3. He is scheduled to report on April 28.

LyondellBasell has topped the Zacks consensus estimate in three of the last four quarters, while missing once. The company has an earnings surprise for the last four quarters of about 1% on average. The Zacks consensus estimate for first-quarter earnings stands at $1.80. LYB’s first quarter results are expected to reflect the benefits of subdued energy and commodity price levels. Demand is expected to be steady from the consumer packaging, oxyfuel and refining markets. Oxyfuel margins are expected to remain strong in the first quarter due to lower feedstock costs.

LyondellBasell Industries NV award and EPS surprise

LyondellBasell Industries NV award and EPS surprise

LyondellBasell Industries NV price-eps-surprise | Quote LyondellBasell Industries NV

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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