The chemical industry has witnessed a dramatic recovery since the pandemic. With supply disruptions easing out and demand from specialty and commodity sectors rising, the U.S. chemical output is expected to rise by 4.3% in 2022.
With a balance of trade surplus in excess of $20 billion, this U.S. chemical industry remains one of the world’s largest producers and contributes 21% of the U.S. GDP.
Additionally, with increased support in inventory building and end-use demand, this market should register solid growth in the years to come. The global specialty chemicals market is projected to reach $747.63 billion by 2028, exhibiting a CAGR of 3%.
Given this backdrop, fundamentally strong chemical stocks Dow Inc. (DOW), Cabot Corporation (CBT), and Sisecam Resources LP (SIRE) could be worth your attention.
Dow Inc. (DOW)
DOW provides materials science solutions for packaging, infrastructure, mobility, and consumer applications. It operates through Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials & Coatings segments.
On November 15, DOW announced a new collaboration with Waste Management Inc. (WM) to improve residential recycling for hard-to-recycle plastic films by allowing consumers in select areas to recycle these materials directly in their curbside recycling. Once operating at full capacity, this program is expected to help divert more than 120,000 metric tons of plastic film from landfills annually. This should be strategically beneficial for the companies.
On October 13, DOW declared a dividend of 70 cents per share, payable to shareholders on December 9, 2022. This marks the 445th consecutive dividend paid by the company, demonstrating its strong cash generation ability.
DOW’s annual dividend of $2.80 yields 5.5% at its current share price. Its dividends have grown at a 10.1% CAGR over the past three years.
For the nine months ended September 30, DOW’s cash provided by operating activities increased 21.7% year-over-year to $5.40 billion. Total current liabilities came in at $12.32 billion on September 30, 2022, compared to $13.23 billion on December 31, 2021. Its operating EPS came in at $1.11 for the third quarter.
The consensus revenue estimate of $57.21 billion in the fiscal year ending December 2022 reflects a 4.1% improvement year-over-year. Its consensus EPS is estimated to be $6.49 for the same year. Additionally, DOW has surpassed the Street’s EPS estimates in three of the trailing four quarters.
The stock has gained 1.8% over the past month to close the last trading session at $51.07.
DOW’s POWR Ratings reflect its promising outlook. It has an overall B rating, which translates to a Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Quality. It is ranked #30 out of 87 stocks in the A-rated Chemicals industry.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for DOW, click here.
Cabot Corporation (CBT)
CBT operates as a specialty chemicals and performance materials company through two segments, Reinforcement Materials; and Performance Chemicals. It offers reinforcing and specialty carbons, as well as industrial products and engineered elastomer composites solutions.
On November 10, 2022, the Board of Directors declared a quarterly dividend of $0.37 per share, payable on December 9, 2022.
Additionally, the company has been paying dividends for 11 consecutive years. Its dividend payouts have grown at a 3.5% CAGR over the past five years. Its current dividend translates to a 2.05% yield, while its four-year average yield is 2.91%.
CBT’s net sales increased 23% year-over-year to $1.11 billion for the fiscal third quarter of 2022. Its net income came in at $94 million, up 224.1% year-over-year. Furthermore, its adjusted EPS came in at $1.55, up 39.6% year-over-year.
For the fiscal quarter ending March 2023, Street expects CBT’s revenue to be $1.14 billion, representing a 4.1% year-over-year rise. The company’s EPS is expected to increase by 2.4% to $1.73 for the same period. The company also beat the EPS estimates in all four trailing quarters.
Over the past year, the stock has gained 28.2% to close the last trading session at $72.75.
It is no surprise that CBT has an overall B rating, which equates to a Buy in our POWR Ratings system.
The stock also has a B grade for Growth and Quality. Within the Chemicals industry, CBT is ranked #18.
Click here to access the additional POWR Ratings for Momentum, Value, Sentiment, and Stability for CBT.
Sisecam Resources LP (SIRE)
SIRE engages in the trona ore mining and soda ash production businesses internationally. It processes trona ore into soda ash, which is a raw material in flat glass, container glass, chemicals, paper, and other consumer and industrial products.
On October 28, SIRE declared its quarterly cash distribution of $0.50 for the third quarter of 2022, which was payable to unitholders on November 17, 2022. Its $2.15 annual dividend yields 10.09% at its current share price.
For the fiscal third quarter ended September 30, SIRE’s net sales increased 40.5% year-over-year to $190.50 million. Its net income grew 101.9% from the prior-year period to $31.10 million, while the adjusted EBITDA attributable to SIRE rose 69.2% year-over-year to $20.30 million. Net income per share rose 111.1% year-over-year to $0.76.
The company has a commendable earnings surprise history as it beat the consensus EPS estimates in three of the trailing four quarters. The stock has gained 29.2% year-to-date to close its last trading session at $21.21.
SIRE’s promising outlook is reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It also has an A grade for Growth and Quality and a B for Value, Stability, and Sentiment. SIRE is ranked first in the same industry.
Click here to see the additional POWR Ratings for SIRE for Momentum.
DOW shares were trading at $50.59 per share on Friday afternoon, up $0.03 (+0.06%). Year-to-date, DOW has declined -6.28%, versus a -15.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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