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U.S. Chemical Volumes Set for An Upswing in 2021: 5 Picks

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The U.S. chemical industry remains on the path to recovery from the coronavirus-induced downturn and is poised for an upturn this year on the back of a rebound in the global economy, according to the newly released “Mid-Year 2021 Chemical Industry Situation and Outlook” by the American Chemistry Council (“ACC”).

The Washington, DC-based chemical industry trade group expects U.S. chemical industry metrics to rise this year on a recovery in key end-use markets and export customers from the pandemic-led slowdown. It envisions chemical production volumes, shipments and capital spending to rebound from the economic and business disruptions wrought by coronavirus.

The trade group expects a swift recovery in the world economy despite multiple risks and uncertainties including supply chain bottlenecks, trade tensions, inflation and weather-related disruptions. It sees global GDP to rise 6.1% in 2021.

U.S. industrial activities have also been accelerating since the third quarter of 2020, although weather-related supply chain disruptions have caused headwinds in some industries. The ACC projects U.S. industrial production to grow 5.5% in 2021. Most industrial sectors are expected to expand this year, with durable goods manufacturing seeing the fastest growth. The trade group also sees global industrial production to rise 7.2% in 2021. Demand for goods is driving production despite supply chain disruptions.

The ACC also projects U.S. chemical production volumes to expand 1.4% this year following a 3.6% decline in 2020. Chemical shipments are expected to rise 8.1% after declining 13.5% last year. Basic chemicals volumes are also forecast to go up 0.5% in 2021. The trade group also expects specialty chemicals volumes to expand 3.8% in 2021. Moreover, chemical industry capital spending is expected to climb 11.9% to $30.6 billion in 2021 after falling 17.6% in 2020.

On the chemical end-use market front, vehicle sales are forecast to average 17 million in 2021 and 2022 after falling to 14.4 million last year, notwithstanding production constraints due to shortages of key materials. Moreover, housing starts are projected to increase to 1.59 million this year from 1.4 million in 2020. Housing demand has been supported by record-low mortgage rates and remote work, the trade group noted.

Meanwhile, U.S. chemical exports are predicted to grow 5.8% in 2021 after a 7.6% drop in 2020. Exports are rising on the reopening of major economies and an improvement in import demand in partner economies. However, the recovery will be mixed and remains vulnerable to risks, the ACC noted. The U.S. chemical industry is also expected to retain its net exporter position, supporting overall U.S. goods exports.

5 Top Chemical Stocks to Buy

The U.S. chemical industry has rebounded from the pandemic-led slump and is poised for an upswing this year on strength across major end-markets, higher industrial activities and a recovery in chemical exports. Amid such a backdrop, it would be prudent to invest in chemical stocks with compelling growth prospects.

We highlight the following five stocks with Zacks Rank #1 (Strong Buy) or 2 (Buy) that are good options for investment right now.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar Solutions Inc. UNVR

Illinois-based Univar sports a Zacks Rank #1. The company is well placed to gain from consistent market expansion and acquisitions. It will benefit from significant synergies of the Nexeo Solutions acquisition. Moreover, Univar is focused on cost-cutting, expense management and productivity actions, which are helping the company minimize operational costs and boost margins.

The company has an expected earnings growth rate of 35.2% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 27.1% upward over the last 60 days. The company also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 30.9%. Moreover, its shares have popped around 47% over the past year.

Cabot Corporation CBT

Based in Massachusetts, Cabot carries a Zacks Rank #1. Cabot should gain from a recovery in demand from its automotive and tire customers from the pandemic-led slowdown, its disciplined execution of operations and targeted growth initiatives. Passenger car miles driven and automotive builds have improved while strong truck miles driven is driving the replacement tire market. The company is also benefiting from strength in infrastructure, packaging and consumer-driven applications.

Cabot has expected earnings growth rate of 137.5% for the current fiscal year. Moreover, the consensus estimate for current fiscal year earnings has been revised 23.2% upward over the last 60 days. The company’s shares are also up around 54% over the past year.

DuPont de Nemours, Inc. DD

Delaware-based DuPont carries a Zacks Rank #1. DuPont is gaining from sustained strength in semiconductors and smartphone technologies, continued recovery in automotive and industrial markets and strong demand for water filtration technologies. Moreover, the company remains focused on driving growth though innovation and new product development. DuPont is also benefiting from cost synergy savings and productivity improvement actions.

The company has an expected earnings growth rate of 12.8% for the current year. The consensus estimate for current-year earnings has been revised 8.3% upward over the last 60 days. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 13.6%. Moreover, its shares have shot up around 47% over the past year.

Olin Corporation OLN

Based in Missouri, Olin carries a Zacks Rank #1. The company should benefit from its actions to improve its cost structure and efficiency and drive productivity through a number of projects. It is also expected to gain from cost and other benefits from its investment in the IT project. The Lake City U.S. Army ammunition contract should also drive sales and profitability of its Winchester segment.

The company has expected earnings growth rate of 506.7% for the current year. Moreover, the Zacks Consensus Estimate for its current-year earnings has been revised 1% upward over the last 60 days. The company's shares have also surged around 321% over a year.

Dow Inc. DOW

Michigan-based Dow has a Zacks Rank #2. It is benefiting from cost synergy savings and productivity initiatives and its investment in high-return projects. Its restructuring program is also expected to deliver margin benefits. Dow also remains committed to invest in attractive areas through highly accretive projects. It is also benefiting from higher demand for its materials across healthcare and packaging markets and a recovery across construction, automotive and appliances end markets.

Dow has expected earnings growth rate of 326.5% for the current year. The consensus estimate for current-year earnings has been revised 15.3% upward over the last 60 days. The company has also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 26.5%. Its shares have also rallied roughly 55% over a year.

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DuPont de Nemours, Inc. (DD) : Free Stock Analysis Report
 
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