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Chemical Stocks Earnings Slated on Oct 24: MEOH, GRA & More

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Chemical Stocks Earnings Slated on Oct 24: MEOH, GRA & More

Investors should watch out for these chemical stocks before their Q3 results as the chemical industry's momentum is likely to continue in the third quarter.

A few chemical companies are lined up to report quarterly numbers on Oct 24. Per the Zacks Industry classification, the chemical industry is grouped under the broader Basic Materials sector, which is among the Zacks sectors that are expected to record the strongest results in Q3. Earnings for the sector are projected to surge 33.5%, while revenues are expected to rise 14.3%, per the latest Earnings Preview.

The chemical industry continues its good run in 2018 on sustained demand strength across major end-use markets such as construction and automotive. Improving fundamentals in the energy space, driven by an upswing in crude oil prices bode well for the industry.

A rebound in crude oil prices has led to a recovery in demand for chemicals in the energy market and a favorable pricing environment for chemical products as their prices essentially move in tandem with oil prices.

Companies in the chemical space face headwinds from a spike in costs of raw materials as a result of short supply partly due to production outages and plant shutdowns. However, strategic measures including productivity improvement, pricing hike actions and portfolio restructuring are likely to drive the performance of chemical makers in the impending quarter. Cost-cutting measures by these companies are likely to continue improving industry-wide margin. Synergies from acquisitions will also boost earnings. Moreover, President Donald Trump’s business-friendly tax reform is a positive for U.S. chemical stocks.

We take a look at four chemical companies that are slated to report their results tomorrow.

Methanex Corporation MEOH will report third-quarter numbers after the closing bell. The company has an Earnings ESP of 0.00% as the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.99. The stock sports a Zacks Rank #1 (Strong Buy) but its Earnings ESP makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a positive average earnings surprise of 13.1%.

Methanex is likely to gain from Strong demand and pricing fundamentals for methanol. Demand is driven by traditional derivatives and energy-related applications in Asia, particularly in China. Per the company, global demand for methanol increased 4% year over year in the last reported quarter and is expected to remain healthy in 2018.

Moreover, higher methanol prices are boosting the company’s revenues and margins. In the second quarter, the company’s average realized prices for methanol climbed roughly 24% year over year. Higher prices are likely to continue to support results in the third quarter.

Methanex Corporation Price and EPS Surprise

 

Methanex Corporation Price and EPS Surprise | Methanex Corporation Quote

W.R. Grace & Co. GRA will report third-quarter results before the opening bell. The company has an Earnings ESP of -0.74%. The Zacks Consensus Estimate for the quarter is pegged at $1.02. It has a Zacks Rank #4 (Sell), which we caution against going into the earnings announcement.

The company delivered better-than-expected results in the last four quarters, leading to a positive average earnings surprise of 10.6%.

The Zacks Consensus Estimate for total revenues is pegged at $471 million, projecting year-over-year growth of 9.5%.

The company, in second-quarter earnings call, stated that it expects adjusted earnings to rise 13-15% year over year in the third quarter. The company had strong product mix in the second quarter and in the third quarter it has several scheduled plant turnarounds. This is likely to result in a sequential decline in gross margins. Moreover, raw material inflation is a concern. Also, the company is expected to experience headwinds from insurance proceeds in the third quarter.

W.R. Grace & Co. Price and EPS Surprise

 

W.R. Grace & Co. Price and EPS Surprise | W.R. Grace & Co. Quote

Ingevity Corporation NGVT will report third-quarter results after the closing bell. The company has an Earnings ESP of +6.95%. The Zacks Consensus Estimate for the quarter is pegged at $1.04. It has a Zacks Rank #3 (Hold), which coupled with a positive ESP, makes us reasonably confident of an earnings beat.  

Ingevity surpassed the Zacks Consensus Estimate in all of the trailing four quarters, delivering an average beat of 20.6%.

Revenues for the third quarter are projected to rise 15.9% year over year, as the Zacks Consensus Estimate is currently pegged at $306 million.

The Zacks Consensus Estimate for revenues for the Performance Chemicals segment is pegged at $215 million, reflecting an increase of 20.1% from the year-ago quarter’s tally. The same for the Performance Materials segment is pegged at $91 million, representing year-over-year growth of 7.1%.

The company is well poised to gain from the buyout of Georgia-Pacific’s pine chemicals business. The acquisition contributed to strong growth in sales of the Performance Chemicals division in the second quarter. The acquisition is expected to create net synergies of roughly $11 million through manufacturing optimization, lower logistics costs and leveraged procurement costs.

The Performance Chemicals division will also benefit from higher adoption of tall oil fatty acid (TOFA)-based products. Healthy TOFA pricing had positive impact on the margins of the division during first-half 2018. The company expects high margin application areas to continue gaining strength.

Ingevity Corporation Price and EPS Surprise

 

Ingevity Corporation Price and EPS Surprise | Ingevity Corporation Quote

PolyOne Corporation POL will report third-quarter results before the opening bell. The company has an Earnings ESP of -0.93%. The Zacks Consensus Estimate for the quarter is pegged at 62 cents. It has a Zacks Rank #4 (Sell), which we caution against going into the earnings announcement.

The company delivered better-than-expected results in three of the trailing four quarters, leading to a positive average earnings surprise of 3.5%.

The Zacks Consensus Estimate for PolyOne’s third-quarter revenues is pegged at $883 million, suggesting a rise of 7.8% from the year-ago quarter’s tally.

The Zacks Consensus Estimate for sales for the Color, Additives and Inks unit is pegged at $260 million, reflecting an increase of 10.6% on a year-over-year basis. The same for the Specialty Engineered Materials division is at $164 million, representing year-over-year growth of 5.1%. Moreover, the Zacks Consensus Estimate for Performance Products and Solutions division sales is pegged at $187 million, reflecting a rise of 6.3% from the year-ago quarter’s tally.

PolyOne faces headwinds from raw material cost inflation, which may weigh on sales and earnings in the third quarter. However, the company is gaining from acquisitions and strategic investments in commercial resources that are contributing to results.  

PolyOne Corporation Price and EPS Surprise

 

PolyOne Corporation Price and EPS Surprise | PolyOne Corporation Quote

 
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