Zacks Industry Outlook Axalta Coating Systems, Ingevity and AdvanSix

For Immediate ReleaseChicago, IL – December 12, 2024 – Today, Zacks Equity Research Axalta Coating Systems Ltd. AXTA, Ingevity Corp. NGVT and AdvanSix Inc. ASIX.Industry: Specialty ChemicalsLink: https://www.zacks.com/commentary/2381908/3-chemical-specialty-stocks-to-watch-amid-industry-challengesThe Zacks Chemicals Specialty industry is mired in challenges from sluggish demand, largely due to the slowdown in Europe and a slow economic recovery in China. Margins of companies in this space also remain under pressure due to the still-elevated input, supply chain and logistics costs.Industry players like Axalta Coating Systems Ltd., Ingevity Corp.  and AdvanSix Inc. are banking on strategic measures, including operating cost reductions, to tide over a persistently challenging environment.About the IndustryThe Zacks Chemicals Specialty industry consists of manufacturers of specialty chemical products for a host of end-use markets such as textile, paper, automotive, electronics, personal care, energy, construction, food & beverages and agriculture. These chemicals (including catalysts, surfactants, specialty polymers, coating additives, pesticides and oilfield chemicals) are used based on their performance and have a specific purpose.Specialty chemicals can be single molecules or a combination of molecules referred to as formulations, and they provide a vast range of effects upon which various industries rely. Their compositions significantly influence the performance of the finished products. Specialty chemicals have applications in the manufacturing process of a vast range of products, including paints and coatings, cosmetics, petroleum products, inks and plastics.What's Shaping the Future of the Chemical Specialty Industry?Headwinds From Demand Slowdown: Companies in the chemical specialty space are facing headwinds from demand softness in building and construction as well as industrial end markets, especially in Europe and China, due to the economic slowdown. Elevated borrowing costs and inflation have taken a bite out of the residential construction industry. Manufacturing activities have also weakened amid softer demand for goods and higher borrowing costs.A slower recovery in economic activities in China is hurting demand in that country. The ongoing geopolitical tension and high inflation have also dampened demand in Europe. While customer inventory de-stocking is almost complete, some lingering impacts of the same in certain markets are expected to continue over the near term. The demand slowdown is likely to weigh on the volumes of chemical specialty companies.Cost Pressure Still a Concern: Specialty chemical makers are facing headwinds from raw material cost inflation, and supply-chain and freight transportation disruptions. Some companies are exposed to challenges from elevated logistics and labor costs. While raw material costs have moderated somewhat lately, driven by the easing of supply-chain disruptions, they remain higher than the pre-pandemic levels. The lingering impacts of inflationary pressures are expected to continue over the short haul and weigh on the margins of chemical specialty companies.Self-Help Actions to Aid Results: The companies in this space are executing a raft of self-help measures — including cost-cutting and productivity improvement, expansion into high-growth markets, restructuring, operational efficiency improvement, and actions to strengthen the balance sheet and boost cash flows — in a bid to stay afloat amid the prevailing headwinds. The industry participants are aggressively implementing actions to cut costs. The measures are likely to help the companies sail through the ongoing challenges.Zacks Industry Rank Indicates Downbeat ProspectsThe Zacks Chemicals Specialty industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #171, which places it in the bottom 32% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates a bleak near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.Industry Underperforms Sector and S&P 500The Zacks Chemicals Specialty industry has underperformed both the Zacks S&P 500 composite and the broader Zacks Basic Materials sector over the past year.The industry has lost 14.7% over this period compared with the S&P 500’s rise of 30.9% and the broader sector’s increase of 3%.Industry's Current ValuationOn the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing chemical stocks, the industry is currently trading at 21.42X, above the S&P 500’s 18.82X and the sector’s 11.75X.Over the past five years, the industry has traded as high as 22.91X, as low as 7.92X, with a median of 11.73X.3 Chemical Specialty Stocks to Keep a Close Eye OnAxalta Coating Systems: Pennsylvania-based Axalta is a global coatings company engaged in the manufacturing, marketing and distribution of coatings solutions. AXTA is benefiting from the strength in the refinish business, which is offsetting the weakness in industrial markets.The acquisition of CoverFlexx Group has enhanced Axalta's refinish business by incorporating an extensive range of automotive refinish and aftermarket coatings, including primers, basecoats, clearcoats and various detailing products of the former. Axalta has also strategically expanded its portfolio by acquiring Andre Koch AG, a well-established Refinish distribution partner headquartered in Switzerland.Axalta, carrying a Zacks Rank #2 (Buy), has expected earnings growth of 36.9% for the current year. The Zacks Consensus Estimate for AXTA’s current-year earnings has been revised upward by 4.4% over the last 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Ingevity: South Carolina-based Ingevity is a global producer of high-performance activated carbon materials and specialty chemicals. The company is expected to benefit from the repositioning of its Performance Chemicals segment, which is aimed at lowering exposure to lower-margin end markets.Operational improvements leading to lower input costs and better manufacturing efficiency are also aiding performance in its Performance Materials unit. Ingevity is taking several actions to expand capacity and drive long-term growth. The acquisition of Ozark Materials has also strengthened the company’s position in the paving construction industry.Ingevity surpassed the Zacks Consensus Estimate in three of the trailing four quarters. It has a trailing four-quarter earnings surprise of roughly 95.4%, on average. NGVT carries a Zacks Rank #2.AdvanSix: New Jersey-based AdvanSix is a manufacturer of nylon 6 resin, chemical intermediates and ammonium sulfate fertilizer. It is benefiting from its differentiated product portfolio, exposure to diverse end markets and favorable demand and pricing. ASIX is expected to gain from improved nylon demand conditions and the growth of its differentiated products. The favorable agricultural industry fundamentals also bode well for ammonium sulfate. AdvanSix has a healthy balance sheet and generates substantial cash flows, which allows it to drive shareholder value and fund growth initiatives.ASIX surpassed the consensus estimate in three of the trailing four quarters. It has a trailing four-quarter earnings surprise of roughly 18.9%, on average. AdvanSix carries a Zacks Rank #3 (Hold).Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast 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.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>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 Axalta Coating Systems Ltd. (AXTA): Free Stock Analysis Report Ingevity Corporation (NGVT): Free Stock Analysis Report AdvanSix (ASIX): 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