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The Zacks Analyst Blog Highlights: Westlake Chemical, Trinseo, JSR Corp, Covestro and Victrex

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Zacks Equity Research
·8 min read
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For Immediate Release

Chicago, IL – March 19, 2021 – 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: Westlake Chemical Corporation WLK, Trinseo S.A. TSE, JSR Corporation JSCPY, Covestro AG COVTY and Victrex plc VTXPF.

Here are highlights from Thursday’s Analyst Blog:

Chemical Plastics on Solid Ground: 5 Top Stocks to Snap Up

The chemical plastics industry has pulled off a strong comeback on the back of a rebound in industrial demand. The upturn in demand across major end-use industries such as automotive, tire and building & construction from the coronavirus-led slump has put the wind back in the sails of the industry.

Coronavirus put a brake on industrial activities globally for much of the first half of 2020, sapping demand for plastics in key markets including automotive, tire, construction and textile. Weaker demand coupled with a sharp decline in oil prices also exerted pressure on the product prices of chemical plastics makers.

However, demand started to pick up from the third quarter with a rebound in industrial and manufacturing activities globally from the pandemic-induced slowdown. Notably, demand for polyvinyl chloride ("PVC") resin is strengthening with the revival in the construction sector, following easing of lockdowns and restrictions.

Building and construction is a significant market for PVC and the favorable trends in the housing market augur well for this major plastic product. The strength in the residential construction market is driving demand for PVC globally. The pandemic has also caused a rise in spending on repair and remodeling activities as people remain hunkered down at home. As such, demand for PVC is expected to go up on higher home improvement activities.

Moreover, an accelerated recovery in the automotive sector from the virus-led slump is driving demand for polyethylene — the most widely consumed polymer globally — in this major market. Demand has also picked up in tire applications.

Demand for polyethylene also remains strong in the packaging market for applications in films, bags, bottles and other packaging materials, thanks to growing usage in food and consumer packaging. The pandemic has led to a surge in demand for food packaging on the back of a rise in consumption of packed products. Higher industrial activities and growing consumer spending are expected to drive demand for major plastic products including polyethylene and PVC across key markets moving ahead.

Favorable Zacks Industry Rank

The Zacks Chemicals Plastics industry currently carries a Zacks Industry Rank #3, which places it in the top 1% of more than 250 Zacks industries. The favorable rank reflects the industry's strength. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

5 Stocks Worth Betting On

The chemical plastics industry is riding on an upswing in demand in key markets including automotive and construction. A pick up in industrial activities bode well for the industry. As such, it would be prudent to invest in stocks in the space that have compelling prospects and are well poised for solid upside.

We highlight the following five stocks with a 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.

Westlake Chemical: Texas-based Westlake Chemical sports a Zacks Rank #1. The company should benefit from higher demand in its polyethylene business in specialty applications, especially food packaging, and strength in global demand for PVC resin. It is seeing strong demand in the downstream building products business on the back of new housing starts and spending on repair and remodeling activities. The company will also gain from its investment in capacity expansion projects, synergies of acquisitions, and actions to improve operating efficiency and reduce costs.

Westlake Chemical has expected earnings growth of 162.5% for the current year. The Zacks Consensus Estimate for earnings for the current year has been revised 71.7% upward over the last 60 days. The stock has also gained roughly 45% over the over the past six months.

Trinseo: The Pennsylvania-based company flaunts a Zacks Rank #1. It is expected to benefit from demand strength in end markets such as tires, automotive, appliances, construction and packaging, which is likely to drive its volumes. Benefits of cost-reduction and commercial excellence initiatives are also expected to get reflected on its performance.

Moreover, the recently announced acquisition of Arkema's polymethyl methacrylates and activated methyl methacrylates businesses will allow the company to transform to a higher-margin, less-cyclical solutions provider. The buyout is also expected to deliver meaningful cost synergies and IT-related productivity savings.

The company has expected earnings growth of 231.7% for the current year. The consensus estimate for the current year has been revised 91.5% upward over the last 60 days. The stock has also shot up roughly 172% over the past six months.

JSR Corp.: The Japan-based company carries a Zacks Rank #2. The company is expected to benefit from its strategic moves including actions to expand its business in growth areas and reduce business costs amid a still-challenging environment. A strong rebound in automotive production and the underlying strength in the semiconductor market should also drive its results.

The company is seeing higher volumes for semiconductor materials. The strength in semiconductors is underpinned by the expansion of infrastructure and device demand from digitization.

The company has an expected earnings growth rate of 16.8% for the current fiscal year. The consensus estimate for the current fiscal has been revised 11% upward over the last 60 days. The stock has also rallied roughly 49% over the past six months.

Covestro: Germany-based Covestro carries a Zacks Rank #2. The company is expected to benefit from the rebound in automotive and construction end-use markets. Its cost-saving actions are also expected to lend support to its margins. The announced acquisition of Royal DSM's Resins & Functional Materials business will also expand the company's portfolio in the attractive growth market for sustainable coating resins and provide considerable synergies.

Covestro has expected earnings growth of 72.5% for the current year. The Zacks Consensus Estimate for the company's current-year earnings has been revised 33.2% upward over the last 60 days. The company has also seen its shares rally roughly 34% over the past six months.

Victrex: This UK-based company has a Zacks Rank #2. The company is expected to benefit from improved demand across automotive, medical and electronics markets from the pandemic-led slowdown. Improvement in these markets is likely to drive its sales volumes. Cost-management actions are also expected to lower operating overheads and support its bottom line.

Victrex has expected earnings growth of 19.8% for the current fiscal year. The consensus estimate for the company's earnings for the current fiscal has been revised 9.5% upward over the last 60 days. The stock is up roughly 18% over the past six months.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?

Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don't miss your chance to get in on these long-term buys.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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Westlake Chemical Corporation (WLK) : Free Stock Analysis Report
 
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