A host of chemical companies is slated to report their quarterly numbers next week. Per the Zacks industry classification, the chemical industry falls under the broader Basic Materials sector. The Q1 earnings picture is bleak for Basic Materials, which reeled under the effects of the coronavirus pandemic. Overall earnings for the sector are projected to fall 35.2% on 12.3% lower revenues, per the latest Earnings Outlook.
Demand weakness across major chemical end-use markets such as construction, automotive and electronics is likely to have weighed on the performance of chemical companies in Q1. Coronavirus-induced lockdowns and quarantine restrictions crippled industrial activities globally during the March quarter, hurting demand.
Notably, disruptions associated with the outbreak hurt chemical demand in China, a major consumer, as industrial activities in the country took a blow due to the shutdowns. Activities in the construction space (a key chemical end-use market) in China slowed down due to quarantine restrictions on workers, who returned from the Chinese New Year holidays.
The automotive industry, another major end-market for chemicals, also got hammered as the outbreak pummelled demand and disrupted supply chains. Consumption of chemicals such as ethylene, polyethylene and polyvinyl chloride in China was impacted in Q1.
Coronavirus also paralysed industrial activities in other parts of Asia and in Europe. As such, a downturn in demand across major industries is expected to have hurt sales volumes and revenues of chemical companies in the March quarter.
Chemical companies are also likely to have faced headwinds from higher raw material costs in Q1 due to short supply. The closure of a large swath of factories across China to put a check on the spread of the virus disrupted the global supply chain. This is likely to have affected the availability of key raw materials for the chemical industry and pushed up prices of these inputs.
As such, Q1 results are expected to reflect some impact of input cost inflation. U.S. chemical makers, in particular, are expected to have faced the heat as they procure several chemicals critical to their production processes from China that are not available elsewhere.
Nevertheless, these companies remain focused on strategic measures, including cost-cutting and productivity improvement, and actions to raise selling prices. A number of companies have been taking aggressive price increase actions in an inflationary environment. Chemical companies also remain actively focused on acquisitions to diversify and drive growth. Benefits of these initiatives might reflect on their Q1 results.
Some of the companies are also likely to have gained from higher demand for chemicals and materials across industries like healthcare and packaging, thanks to coronavirus. With a surge in the number of coronavirus cases around the world, demand for health, hygiene and safety products (including PPEs, sanitizers, disinfectants and cleaning products) has skyrocketed.
We take a look at five major chemical companies that are gearing up to report their Q1 results next week.
PPG Industries, Inc. PPG will report earnings numbers after the closing bell on Apr 27. Our proven model does not conclusively predict an earnings beat for the company this quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, the company has an Earnings ESP of -1.84% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
PPG Industries beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while missed once, the positive surprise being roughly 4%, on average.
The Zacks Consensus Estimate for revenues for PPG Industries for the to-be-reported quarter stands at $3,453 million, suggesting an expected year-over-year decline of 4.7%. The consensus estimate for Q1 earnings is $1.22.
PPG Industries’ results will likely reflect the benefits of its cost-control initiatives and pricing actions. However, unfavorable impacts of weak industrial demand and currency headwind are likely to have affected its performance. (Read more: What's in the Cards for PPG Industries in Q1 Earnings?)
PPG Industries, Inc. Price and EPS Surprise
PPG Industries, Inc. price-eps-surprise | PPG Industries, Inc. Quote
Celanese Corporation CE will report results after the bell on Apr 27. Our proven model does not conclusively predict an earnings beat for the company this time around. This is because it has an Earnings ESP of -7.72% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Celanese beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while missed once. In this timeframe, it delivered an average positive surprise of around 0.6%.
The Zacks Consensus Estimate for revenues for Celanese for the to-be-reported quarter stands at $1,535 million, suggesting an expected year-over-year decline of 9%. The consensus estimate for Q1 earnings is $2.21.
The company’s results will likely reflect the benefits of its productivity actions and strategic acquisitions. However, weak demand and plant turnarounds are likely to have impacted its performance in the quarter. (Read more: Celanese to Post Q1 Earnings: What's in the Offing?)
Celanese Corporation Price and EPS Surprise
Celanese Corporation price-eps-surprise | Celanese Corporation Quote
Dow Inc. DOW will report results before the bell on Apr 30. Our proven model does not conclusively predict an earnings beat for the company. This is because it has an Earnings ESP of -8.35% and a Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for revenues for Q1 for Dow is currently pegged at $9,584 million. The consensus estimate for Q1 earnings is 59 cents.
Soft demand across certain industrial end markets is likely to have hurt Dow’s volumes in Q1. The unfavorable impacts of lower equity earnings from joint ventures, higher pension expenses, turnaround activities at the performance monomers site and third-party supplier outages are also expected to get reflected on the company’s results. However, the company is likely to have benefited from cost synergy savings and its U.S. Gulf Coast investments.
Dow Inc. Price and EPS Surprise
Dow Inc. price-eps-surprise | Dow Inc. Quote
Eastman Chemical Company EMN will report results after the closing bell on Apr 30. Our proven model does not conclusively predict an earnings beat for the company. This is because it has an Earnings ESP of -0.57% and a Zacks Rank #4 (Sell).
Eastman Chemical missed the Zacks Consensus Estimate for earnings in each of the trailing four quarters while beat once. For this timeframe, the company has a negative surprise of roughly 2%, on average.
The Zacks Consensus Estimate for revenues for Eastman Chemical for Q1 is currently pegged at $2,199 million, indicating a 7.6% year-over-year decline. The consensus estimate for Q1 earnings stands at $1.69.
Weak demand due to coronavirus might have impacted the company’s sales volumes in Q1. However, the company’s earnings are likely to have benefited from its cost management actions and growth in high-margin products.
Eastman Chemical Company Price and EPS Surprise
Eastman Chemical Company price-eps-surprise | Eastman Chemical Company Quote
LyondellBasell Industries N.V. LYB will report results ahead of the bell on May 1. Our proven model does not conclusively predict an earnings beat for the company as it has an Earnings ESP of 0.00% and a Zacks Rank #5.
LyondellBasell missed the Zacks Consensus Estimate for earnings in three of the trailing four quarters while beat once. In this timeframe, it delivered an average positive surprise of around 5.2%.
The Zacks Consensus Estimate for Q1 consolidated sales is pegged at $7,561 million, which suggests a fall of 13.9% year over year. The consensus estimate for Q1 earnings stands at $1.36.
The company recently announced its estimated results for Q1. It sees net income in the range $110-$180 million for the quarter. EBITDA is forecast between $610 million and $680 million.
The impact of coronavirus on the company’s global markets and a sharp decline in oil prices are expected to reflect on its results. However, the company is likely to have gained from higher demand for its products in medical applications and packaging.
LyondellBasell Industries N.V. Price and EPS Surprise
LyondellBasell Industries N.V. price-eps-surprise | LyondellBasell Industries N.V. Quote
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