The Zacks Analyst Blog Highlights Albemarle, Celanese, Huntsman and Westlake
For Immediate Release
Chicago, IL – February 10, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Albemarle Corp. ALB, Celanese Corp. CE, Huntsman Corp. HUN and Westlake Corp. WLK.
Here are highlights from Thursday’s Analyst Blog:
4 Chemical Stocks Set to Pull Off a Beat This Earnings Season
Chemical companies’ fourth-quarter results are expected to reflect stable demand across several end-use markets and the benefits of strategic actions to counter continued headwinds from a spike in raw material, energy and logistics costs. However, a slowdown in certain markets, including consumer durables and building & construction and customer inventory destocking are likely to have played spoilsport.
The companies in this space that have reported December-quarter results so far have witnessed volume pressure from demand slowdown partly due to COVID-related impacts in China and the slowdown in Europe, customer destocking and continued headwinds from supply-chain challenges, and input and energy cost inflation. A number of chemical companies are yet to report their quarterly numbers, including Albemarle Corp., Celanese Corp., Huntsman Corp. and Westlake Corp.
How Have Things Shaped Up for These Companies?
Chemical companies are likely to have benefited from firm demand in several markets and pricing actions in the fourth quarter. Demand for chemicals in the automotive market in the United States remains healthy, despite the semiconductor shortage, which affected automotive production in 2022. Moreover, demand in packaging and healthcare remains strong.
The companies in this space are also seeing a recovery in demand across the aerospace and energy markets. A rebound in drilling activities on the back of an uptick in oil prices has led to the demand recovery in the energy space. However, the slowdown in the building & construction market, aggressive customer destocking in consumer durables and a weak automotive market in China are likely to have posed as headwinds.
Chemical companies are also expected to have faced margin pressure, resulting from raw material cost inflation as well as supply-chain and freight transportation disruptions. Supply-chain disruptions have led to a spike in raw material costs. The Russia-Ukraine conflict and new lockdowns in China following a resurgence in COVID-19 infections have put further pressure on the global supply chain.
Higher energy and gas prices, especially in Europe due to the war, have also pushed up the production costs of chemicals and affected demand in that region. The impacts of these headwinds are likely to reflect on the chemical companies’ performance in the fourth quarter. Unfavorable currency movements driven by a stronger dollar are also likely to have been a drag on the fourth-quarter performance.
Against this backdrop, chemical makers remain focused on strategic actions, including cost-cutting and productivity improvement, expansion into high-growth markets, restructuring, operational efficiency improvement, and actions to strengthen the balance sheet and boost cash flows. Several companies in this space have also been taking price increase actions to counter cost inflation. Chemical companies have been actively focused on acquisitions to diversify and drive growth. The benefits of these actions might reflect on their results.
Expectations for Q4
The chemical industry is housed within the broader Zacks Basic Materials sector. Basic Materials is among the sectors that are expected to witness a decline in earnings on a year-over-year basis in the fourth quarter. Overall earnings for the sector are projected to decline 27.6% on 6.8% lower revenues, per the latest Earnings Trends report.
How to Pick Winners?
Given the large number of players operating in the chemical space, picking the right stocks is apparently not an easy task. But our proprietary methodology makes it fairly simple. One can trim the list with the combination of a favorable Zacks Rank — Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — and a positive Zacks Earnings ESP. You can uncover the best stocks to buy or sell before they report 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 stocks that have high chances of delivering earnings surprises in their next announcements. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as much as 70%.
Below, we list four chemical stocks that have the right combination of elements to pull off an earnings surprise this time around:
Albemarle has an Earnings ESP of +7.16% and carries a Zacks Rank #3. The company is scheduled to report on Feb 15.
Albemarle surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.6%. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $7.89, indicating a rise of 681.2% from the prior-year quarter. ALB is likely to have benefited from higher volumes in its lithium business. Higher lithium prices are also likely to have supported its performance.
Tight supply conditions and growing demand for electric vehicles are driving lithium prices. The company’s bromine business is also expected to have gained from strong demand and favorable pricing led by tight market conditions. Its cost-saving and productivity initiatives are also expected to have supported margins.
Albemarle Corporation price-eps-surprise | Albemarle Corporation Quote
Celanese has an Earnings ESP of +4.10% and a Zacks Rank #3. It is scheduled to report on Feb 23. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celanese surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missing twice. The company has a trailing four-quarter earnings surprise of roughly 7.2%, on average. The consensus estimate for fourth-quarter earnings is pegged at $1.56. CE is likely to have gained from its productivity actions, investments in high-return organic projects and strategic acquisitions. Price-increase actions to offset cost inflation are expected to have supported its margins.
Celanese Corporation price-eps-surprise | Celanese Corporation Quote
Huntsman has an Earnings ESP of +7.14% and a Zacks Rank #3. It is slated to report on Feb 21.
Huntsman surpassed the Zacks Consensus Estimate in three of the trailing four quarters while delivering in-line results on the other occasion. The company has a trailing four-quarter earnings surprise of roughly 9.8%, on average. The Zacks Consensus Estimate for fourth-quarter earnings stands at 11 cents.
HUN is likely to have benefited from actions to raise prices and its cost-control initiatives. Higher average selling prices are expected to have supported sales across its segments. The CVC Thermoset and Gabriel Performance Products acquisitions are also likely to have supported its margins.
Huntsman Corporation price-eps-surprise | Huntsman Corporation Quote
Westlake has an Earnings ESP of +8.12% and carries a Zacks Rank #3. It is slated to report on Feb 21.
Westlake surpassed the Zacks Consensus Estimate in three of the trailing four quarters, while missing once. The company has a trailing four-quarter earnings surprise of roughly 1.4%, on average. The Zacks Consensus Estimate for fourth-quarter earnings stands at $2.24.
WLK is likely to have gained from higher demand for its products for repair and remodeling activities and infrastructure spending in municipal water systems, agricultural irrigation and global transportation. Its fourth-quarter performance is also expected to have been aided by lower feedstock and energy costs.
Westlake Corp. price-eps-surprise | Westlake Corp. Quote
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Westlake Corp. (WLK) : Free Stock Analysis Report
Albemarle Corporation (ALB) : Free Stock Analysis Report
Celanese Corporation (CE) : Free Stock Analysis Report
Huntsman Corporation (HUN) : Free Stock Analysis Report
To read this article on Zacks.com click here.