4 Chemical Stocks Poised to Outshine Q4 Earnings Estimates

Chemical companies’ fourth-quarter results are expected to reflect continued demand headwinds in certain key markets, including consumer durables, and building & construction. Nevertheless, the end of customer inventory de-stocking is expected to have provided benefits to these companies. The results of chemical makers are also likely to have been supported by pricing and cost-saving actions and moderated raw material costs. We have handpicked a few chemical companies, DuPont de Nemours, Inc. DD, Eastman Chemical Company EMN, Avient Corporation AVNT and Albemarle Corporation ALB, which are set to beat earnings estimates this earnings season.See the Zacks Earnings Calendar to stay ahead of market-making news.How Have Things Shaped Up for Chemical Stocks?The chemical industry bore the brunt of a demand slowdown in certain major markets and aggressive customer inventory de-stocking in 2024. Lower consumer spending in Europe and a slow recovery in China also impacted demand. China grappled with weakening industrial production and sluggish consumer spending. The slowdown in the real estate sector further suppressed demand for construction chemicals. The slowdown in Europe, resulting from the war in Ukraine, and weaker consumer spending due to high levels of inflation led to softer demand in that region. Energy and feedstock inflation resulted in reduced industrial production and consumer spending in Europe.  Chemical demand is likely to have remained subdued in China and Europe in the December quarter. The downturn in the building & construction market and the de-stocking in consumer electronics played spoilsport, leading to demand destruction in these key markets. In North America, uncertainties surrounding the U.S. housing market weighed on building & construction. Elevated borrowing costs and inflation took a bite out of the residential construction industry. Housing starts declined while home prices remained under pressure in 2024. Manufacturing activities also softened amid weaker demand for goods and higher borrowing costs, while recovery remains tepid. Demand for chemicals in the industrial sector weakened as muted demand has constrained industrial production in the United States.A slowdown in global automotive production curtailed chemical demand in this key end-market last year. Vehicle production was constrained by high input costs and economic uncertainty. The consumer electronics market, a key driver of demand for specialty chemicals and advanced materials, was among the hardest hit. Inventory de-stocking by manufacturers, combined with lower sales of devices such as smartphones and personal computers, resulted in a significant contraction in chemical demand. Following the post-pandemic boom, global electronics demand cooled amid high inflation, elevated interest rates and cautious consumer behavior. The demand slowdown in industrial and consumer durables is expected to have hurt volumes of chemical companies in the fourth quarter.On a positive note, the unprecedented customer inventory de-stocking that weighed heavily on the industry during the first half of 2024, has run its course, leading to low inventory levels. This is expected to have provided some relief to chemical makers in the fourth quarter. The de-stocking was primarily driven by high inflation and the lingering impacts of the pandemic that affected customer spending. The benefits of self-help actions, including actions to raise the selling prices of chemical products, productivity improvement measures and operational efficiency improvement, might also reflect on the performance of companies in this space. A moderation in raw material and energy costs driven by the easing of supply-chain disruptions is expected to have acted as a tailwind.Expectations for Q4The 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 fourth quarter. Overall earnings for the sector are projected to decline 8% on 1% lower revenues, per the latest Earnings Preview.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 ChoicesBelow, we list four chemical stocks that have the right combination of elements to pull off an earnings surprise this time around:DuPont has an Earnings ESP of +0.06% and carries a Zacks Rank #3. It is slated to report on Feb. 11. DuPont surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The company has a trailing four-quarter earnings surprise of roughly 12.9%, on average. The Zacks Consensus Estimate for fourth-quarter earnings stands at 98 cents. DD’s fourth-quarter results are likely to have been supported by its innovation-driven investment, productivity actions and the acquisition of the Spectrum Plastics Group. The benefits of its structural cost actions and strategic price increases are expected to reflect on its performance.DuPont de Nemours, Inc. Price and EPS Surprise DuPont de Nemours, Inc. price-eps-surprise | DuPont de Nemours, Inc. QuoteEastman Chemical has an Earnings ESP of +0.10% and a Zacks Rank #3. It is slated to report on Jan. 30. You can see the complete list of today’s Zacks #1 Rank stocks here.Eastman Chemical surpassed the Zacks Consensus Estimate in each of the trailing four quarters at an average of 7.7%. The Zacks Consensus Estimate for fourth-quarter earnings stands at $1.58. Eastman Chemical is expected to have gained from its innovation-driven growth model, operational execution and cost-management actions. Pricing initiatives are also expected to have supported the company’s bottom line. EMN is also likely to have benefited from lower operating costs from its operational transformation program.Eastman Chemical Company Price and EPS Surprise Eastman Chemical Company price-eps-surprise | Eastman Chemical Company QuoteAvient has an Earnings ESP of +0.11% and carries a Zacks Rank #3. The company is scheduled to report on Feb. 13.Avient surpassed the Zacks Consensus Estimate in each of the trailing four quarters at an average of 7.4%. The Zacks Consensus Estimate for earnings is pegged at 48 cents. AVNT is likely to have gained from the strength in sustainable solutions, cost-reduction actions and new business wins. It is also expected to have benefited from growth in packaging and consumer markets as de-stocking has ended in these major end markets.Avient Corporation Price and EPS Surprise Avient Corporation price-eps-surprise | Avient Corporation QuoteAlbemarle has an Earnings ESP of +19.66% and carries a Zacks Rank #3. The company is expected to report on Feb. 12. Albemarle missed the Zacks Consensus Estimate in three of the trailing four quarters but beat once. The company has a trailing four-quarter negative earnings surprise of roughly 107.8%, on average. The Zacks Consensus Estimate for earnings is pegged at a loss of 37 cents. ALB is likely to have benefited from higher volumes in its lithium business amid pricing pressure. The ramp-up of lithium projects and plant productivity improvements are expected to have supported volumes. The La Negra expansion in Chile and the processing plant in Qinzhou, China are likely to have contributed to volumes. The benefits of ALB’s cost-saving, pricing and productivity initiatives are expected to get reflected on its performance.Albemarle Corporation Price and EPS Surprise Albemarle Corporation price-eps-surprise | Albemarle Corporation Quote7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report DuPont de Nemours, Inc. (DD): Free Stock Analysis Report Albemarle Corporation (ALB): Free Stock Analysis Report Eastman Chemical Company (EMN): Free Stock Analysis Report Avient Corporation (AVNT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks