The Zacks Analyst Blog Highlights LyondellBasell, Chemours, Axalta Coating Systems and Ashland
For Immediate Release
Chicago, IL – October 26, 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: LyondellBasell Industries N.V. LYB, The Chemours Co. CC, Axalta Coating Systems Ltd. AXTA and Ashland Inc. ASH.
Here are highlights from Wednesday’s Analyst Blog:
4 Chemical Stocks Set to Pull Off a Beat This Earnings Season
Chemical companies’ third-quarter results are expected to reflect a slowdown in demand in certain markets, including consumer durables and building & construction, and some lingering impacts of customer inventory destocking. However, the results of these companies are likely to have been supported by firm demand across several end-use markets and the benefits of pricing and cost-saving actions.
The companies in this space that have reported September-quarter results so far have witnessed volume pressure from demand slowdown resulting from weaker global economic activities. A number of chemical companies are yet to report their quarterly numbers, including LyondellBasell Industries N.V., The Chemours Co., Axalta Coating Systems Ltd. and Ashland Inc.
How Have Things Shaped Up for These Companies?
Weaker demand in certain key markets is likely to have affected the performance of chemical makers in the third quarter. The sluggishness in the building & construction market and destocking in consumer electronics are expected to have played spoilsport. In North America, uncertainties surrounding the U.S. housing market are weighing on building & construction. Softer demand in consumer durables and building & construction is expected to have hurt chemical volumes in the quarter to be reported.
A slower recovery in economic activities in China following the lifting of the restrictions related to the resurgence in COVID-19 infections is hurting chemical demand in that country. Global industrial activities have been affected by the weaker demand recovery in China. The slowdown in Europe, resulting from the war in Ukraine and weaker consumer spending due to high levels of inflation and rising interest rates, has also led to softer demand in that region. The lingering weakness in these key regions is likely to have impacted demand for chemicals in the September quarter.
However, chemical companies’ results are expected to reflect stable demand in several markets. Demand for chemicals in the automotive market remains healthy, aided by a recovery in automotive production on an improved supply of semiconductors. 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 demand recovery in the energy space.
Moreover, the benefits of self-help actions, including actions to raise the selling prices of chemical products, productivity improvement measures and operational efficiency improvement, might reflect on the results of the companies in this space. A moderation in raw material and energy costs driven by the easing of supply-chain disruptions is also expected to have acted as a tailwind.
Expectations for Q3
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 third quarter. Overall earnings for the sector are projected to decline 27.1% on 11.7% 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%.
Our Choices
Below, we list four chemical stocks that have the right combination of elements to pull off an earnings surprise this time around:
LyondellBasell has an Earnings ESP of +4.69% and carries a Zacks Rank #3. It is slated to report on Oct 27.
LyondellBasell 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 7.5%, on average. The Zacks Consensus Estimate for third-quarter earnings stands at $1.98. LYB’s third-quarter results are likely to have been supported by favorable oxyfuels and refining margins, aided by demand for transportation fuels. It is also expected to have benefited from lower feedstock costs and healthy automotive demand.
LyondellBasell Industries N.V. price-eps-surprise | LyondellBasell Industries N.V. Quote
Chemours has an Earnings ESP of +0.65% and a Zacks Rank #3. It is slated to report on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chemours 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 7.5%, on average. The Zacks Consensus Estimate for third-quarter earnings stands at 77 cents. The company is expected to have gained from strong execution, higher pricing and cost-cutting measures. Its productivity and operational improvement actions across its businesses are expected to have supported its margins. CC is likely to have witnessed continued strong adoption of the Opteon platform in the quarter to be reported.
The Chemours Company price-eps-surprise | The Chemours Company Quote
Axalta Coating Systems has an Earnings ESP of +5.39% and a Zacks Rank #3. It is slated to report on Nov 1.
Axalta Coating Systems has a trailing four-quarter earnings surprise of roughly 2.1%, on average. The Zacks Consensus Estimate for third-quarter earnings stands at 38 cents. AXTA is expected to have benefited from higher prices and strong market demand. Price and product mix benefits, along with raw material cost deflation are likely to have supported results in its Performance Coatings segment. Continued momentum in Refinish is expected to have offset the weakness in industrial markets. The results in the Mobility Coatings business are also likely to have been driven by healthy volumes, new business wins and favorable pricing.
Axalta Coating Systems Ltd. price-eps-surprise | Axalta Coating Systems Ltd. Quote
Ashland has an Earnings ESP of +10.78% and carries a Zacks Rank #3. The company is expected to report on Nov 6.
Ashland surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missed twice. The company has a trailing four-quarter negative earnings surprise of roughly 2.9%, on average. The Zacks Consensus Estimate for earnings is pegged at 99 cents. Ashland’s pricing and mix improvement actions are expected to have helped it counter inflation in the quarter to be reported. The company is taking a number of actions including reduction of operating costs to boost profitability. The benefits of these actions are likely to reflect on its performance.
Ashland Inc. price-eps-surprise | Ashland Inc. Quote
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Ashland Inc. (ASH) : Free Stock Analysis Report
LyondellBasell Industries N.V. (LYB) : Free Stock Analysis Report
Axalta Coating Systems Ltd. (AXTA) : Free Stock Analysis Report
The Chemours Company (CC) : Free Stock Analysis Report
