The chemical industry plays a crucial part in diverse applications across several end-use industries, resulting in robust demand for specialty chemicals. In addition, the increasing integration and utilization of digital technologies will boost the industry’s growth prospects.
With these factors in mind, investing in fundamentally strong chemical stocks PPG Industries, Inc. (PPG), Akzo Nobel N.V. (AKZOY), and Kuraray Co., Ltd. (KURRY), could be wise for potential gains.
The chemical industry is the backbone of the U.S. economy. Chemicals are vital materials for producing an extensive assortment of consumer products. Also, they are crucial for creating several resources that are essential inputs to numerous industries and sectors in the U.S.
Moreover, the chemical industry is responsible for more than a quarter of the GDP as it supports the production of nearly all commercial and household goods, vital to the nation’s economic growth. The global chemical market is expected to grow at a CAGR of 8.8% from 2023 to 2032.
Specialty chemicals are very high in demand as they are tailored for specific industrial applications. These chemicals are used in various industries, including pharmaceuticals, automotive, food and beverages, automotive, textiles, agrochemicals, construction, electrical & electronics, and more.
In addition, specialty chemicals are integral to developing clean energy technologies like solar panels, batteries, and fuel cells.
According to a report by Grand View Research, the global specialty chemicals market size was estimated at $641.47 billion in 2023 and is expected to increase at a CAGR of 5.2% between 2023 and 2030.
The growing integration of digital technologies is revolutionizing the chemical industry. The global digital transformation in the chemical industry is expected to expand at a CAGR of 25.1% from 2023 to 2028. Chemical companies are increasingly adopting advanced technologies, data, and analytics to enhance several aspects of the chemical manufacturing and supply chain processes.
For example, rapid technological advancements in AI and machine learning offer the industry innovative tools for data analysis and process optimization. Also, incorporating augmented reality (AR) helps to upskill the workforce and ensures that employees are proficient in utilizing digital systems, leading to more efficient operations.
In light of these encouraging trends, let’s look at the fundamentals of the three best Chemicals stocks, beginning with number 3.
Stock #3: PPG Industries, Inc. (PPG)
PPG engages in the manufacturing and distribution of coatings, paints, and specialty materials globally. The company operates through Performance Coatings and Industrial Coatings. PPG offers its products and services to industries, including military, aviation, agriculture and construction, consumer electronics, and automotive.
On November 20, PPG launched the DP7000 Air-Dry Primer and a suite of specific ancillaries in the EMEA (European, Middle Eastern and African) automobile refinish markets. Given its compatibility with other products and quick dry technology, this new launch may be effectively utilized in different temperature circumstances.
The new product launch might extend PPG’s market reach and drive profitability and growth.
On October 18, PPG announced that it had divested all Traffic Solutions operations in Australia and New Zealand to Geveko Markings, a Swedish pavement markings company.
“We are laser-focused on driving business growth, and we regularly review our portfolio to ensure we are in the best position to continue meeting our customers’ needs and growing profitably,” said Ed Baiden, PPG’s global general manager, Traffic Solutions.
“We want to concentrate our investments on strategic growth areas so that we may continue to be a leader in the industry as a premier provider of traffic safety product solutions,” Baiden added.
In the third quarter that ended September 30, 2023, PPG’s net sales increased 3.9% year-over-year to $4.64 billion. Also, net income attributable to PPG grew 29.5% year-over-year to $426 million. Its earnings per share attributable to PPG came in at $1.79 billion, up 28.6% from the prior year’s quarter.
As of September 30, 2023, the company’s cash and cash equivalents came in at $1.22 billion, compared to $1.10 billion as of December 31, 2022.
Analysts expect PPG’s revenue for the fourth quarter (ending December 2023) to increase 1.6% year-over-year to $4.25 billion. The company’s consensus EPS of $1.49 for the current quarter indicates an improvement of 22% year-over-year. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters.
PPG’s stock gained 9.6% over the past month and 8.7% year-to-date to close the last trading session at $136.64.
PPG’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Growth, Sentiment and Quality. It is ranked #11 of 83 stocks within the Chemicals industry.
To see additional POWR Ratings of PPG for Stability, Value, and Momentum, click here.
Stock #2: Kuraray Co., Ltd. (KURRY)
Headquartered in Tokyo, Japan, KURRY is a manufacturer, producer, and seller of resins, fibers, activated carbon, chemicals, and high-performance membranes and systems globally. The company operates through segments including Vinyl Acetate; Isoprene; Functional Materials; Fibers and Textiles; and Trading.
In October, KURRY announced the development of PVA hydrogel microcarriers for cell cultures for regenerative medicine. These microcarriers will have high robustness and safety, very efficient culture, and excellent cell observability. This newly developed product will be available from January 2024 in Japan and overseas, beginning with the U.S.
On August 9, KURRY announced a planned increase of its globally in-demand ethylene vinyl alcohol copolymer (EVAL) production capacity in the U.S. and Europe. KURRY will add a total of 5,000 tons/year to the capacity of U.S. and European bases of operation in 2024, with another 5,000 tons/year to be added in 2026.
For the third quarter that ended September 30, KURRY’s net sales increased 3.8% year-over-year to ¥574.40 billion ($3.85 billion). The operating income and ordinary income came in at ¥61.70 billion ($413.06 million) and ¥57.75 billion ($386.62 million), respectively.
In addition, the company’s net assets were ¥754.60 billion ($5.05 billion) as of September 30, 2023, compared to ¥668.53 billion ($4.48 billion) as of December 31, 2022.
As per the updated financial guidance for the fourth quarter of 2023, KURRY expects its net sales to be ¥770 billion ($5.15 billion) and its operating income to touch ¥78 billion ($522.18 million).
Analysts expect KURRY’s revenue for the fiscal year (ending December 2023) to increase 177.6% year-over-year to $5.36 billion. Likewise, the company’s revenue for the next year 2024 is expected to grow 6.1% from the prior year to $5.68 billion.
Over the past six months, the stock has gained 10.6% and 29.3% year-to-date to close the last trading session at $31.21.
KURRY’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Stability and a B for Value. Within the Chemical industry, KURRY is ranked #9 of 83 stocks.
Click here to access additional ratings of KURRY for Growth, Momentum, Quality and Sentiment.
Stock #1: Akzo Nobel N.V. (AKZOY)
Based in Amsterdam, Netherlands, AKZOY engages in the production and sale of paints and coatings internationally. It provides decorative paints, lacquers, and varnishes, and a range of mixing machines and color concepts for building, renovation, and specialty coatings segments. It also offers performance coatings for ships, cars, aircraft, and yachts.
On November 16, AKZOY announced that its Packaging Coatings business has just launched the first two products in its new AccelstyleTM range.
AKZOY will also invest €32 million ($34.89 million) in a new plant at its Vilafranca site in Spain to produce bisphenol-free coatings for the metal packaging industry in EMEA. The facility is expected to be operational by mid-2025. The management is optimistic that it will help the company respond to a strong need from the packaging industry.
During the third quarter that ended September 30, 2023, AKZOY’s gross profit grew at 14.7% year-over-year to €1.12 billion ($1.22 billion). The company’s adjusted operating income rose 76.1% from the year-ago value to €324 million ($353.31 million). Its adjusted EBITDA grew 46.3% from the prior year’s quarter to €414 million ($451.45 million).
Also, the company’s net income attributable to shareholders increased 125% year-over-year to €189 million ($206.01 million). Its adjusted earnings per share from continuing operations were €0.99, up 73.7% from the previous year’s quarter.
Street expects AKZOY’s EPS and revenue for the fiscal year (ending December 2023) to increase 58.7% and 1% year-over-year to $1.39 and $11.74 billion, respectively.
Shares of AKZOY have increased 11.3% over the past month and 11.9% year-to-date to close the last trading session at $24.96.
AKZOY’s solid outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
AKZOY has an A grade for Growth and a B for Stability and Quality. It is ranked #8 out of 83 stocks in the Chemicals industry.
Click here to access additional AKZOY ratings for Value, Sentiment and Momentum.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
PPG shares were trading at $137.02 per share on Friday morning, up $0.38 (+0.28%). Year-to-date, PPG has gained 11.04%, versus a 20.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
The post 3 Chemical Stocks Charging up for Positive Gains appeared first on StockNews.com