As industries charge ahead, gearing up for an insatiable need for raw materials, the specialty chemicals market is booming. The surge is impacting sectors like electronics, construction, automotive, and pharmaceuticals, among others. The demand for these vital chemicals is soaring, reshaping the landscape of multiple industries.
With the market poised for growth, investors have a golden opportunity to seize shares in leading specialty chemical companies. Stocks of Quaker Chemical Corporation (KWR), RPM International Inc. (RPM), and Eastman Chemical Company (EMN) seem in a good position to capitalize on the expanding industrial demand.
As the global economy expands, so too does the demand for chemicals. A significant driver behind this growth is the rising demand from the agrochemical sector, where specialty chemicals are crucial in developing high-performance pesticides and fertilizers.
Simultaneously, the construction industry is tapping into the power of these chemicals as additives and performance enhancers in concrete and other materials, further accelerating demand. A report by TechNavio reveals that the specialty chemicals market is set to grow by $368.2 million by 2028, at a 6.8% CAGR. This surge underscores the sector's robust potential.
In line with this, the American Chemistry Council (ACC) projects that global chemical production will grow by 3.4% in 2024 and 3.5% in 2025. Moreover, according to the Independent Commodity Intelligence Services (ICIS), chemical demand is expected to increase by 30% over the next decade, much of which will come from emerging economies.
As millions transition into the middle class, their growing consumption will be a major force in shaping the future of the specialty chemicals market. This consistent growth signals a thriving market, making it an exciting time to explore the opportunities within the specialty chemicals sector.
So, let us dive deep into the fundamentals of three Chemicals stocks, starting with #3.
Stock #3: Quaker Chemical Corporation (KWR)
KWR is involved in developing, producing, and marketing specialty chemical products and offering chemical management services. The company provides industrial process fluids for steel, aluminum, automotive, aerospace, offshore, can, mining, and metalworking companies.
On July 11, KWR introduced its new state-of-the-art manufacturing facility in Zhangjiagang, China. Set to be operational by the second quarter of 2026, the facility would feature cutting-edge industry technology, positioning KWR to enhance its presence and competitiveness in the Asia-Pacific market.
KWR’s trailing-12-month gross profit margin of 37.63% is 29.9% higher than the industry average of 28.98%. Its trailing-12-month levered FCF margin of 11.34% is 123% higher than the sector average of 5.09%. Likewise, the stock’s trailing-12-month asset turnover ratio of 0.68x is 2.5% higher than the industry average of 0.66x.
For the fiscal third quarter that ended September 30, 2024, KWR reported net sales of $462.27 million. The company achieved a non-GAAP operating income of $54.19 million, while its adjusted EBITDA reached $78.56 million. Additionally, KWR posted a non-GAAP net income of $33.98 million and a non-GAAP EPS of $1.89.
Analysts expect KWR’s revenue and EPS for the fiscal year ending December 2025 to increase 3.4% and 13.3% year-over-year to $1.90 billion and $8.78, respectively.
Shares of KWR have surged marginally over the past five days, closing the last trading session at $156.62.
KWR’s POWR Ratings mirror its solid fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
KWR has a B grade for Stability and Quality. In the B-rated Chemicals industry, KWR is ranked #34 out of 80 stocks.
In addition to the POWR Rating highlighted above, you can check KWR’s ratings for Growth, Sentiment, Momentum, and Value here.
Stock #2: RPM International Inc. (RPM)
RPM manufactures and sells chemicals for industrial, specialty, and consumer markets. Its products include waterproofing, coatings, and traditional roofing systems, along with sealants, air barriers, tapes, and foams. The company also provides residential home weatherization systems, as well as roofing and building maintenance services.
On October 31, RPM announced the acquisition of TMP Convert SAS (TMPC), a leading manufacturer of outdoor design and landscape products, which will become part of RPM's Fibergrate Structures business within its Performance Coatings Group. By incorporating TMPC’s innovative products, RPM will expand its reach in the outdoor solutions market.
RPM’s trailing-12-month gross profit margin of 41.45% is 43% higher than the industry average of 28.98%. Its trailing-12-month asset turnover ratio of 1.09x is 64.2% higher than the 0.66x industry average. Additionally, the stock’s trailing-12-month net income margin of 8.43% is 67.2% higher than the sector average of 5.04%.
For the fiscal 2025 first quarter that ended August 31, 2024, RPM’s net sales came in at $1.97 billion. Its adjusted EBIT increased 6.3% year-over-year to $328.34 million. Moreover, net income attributable to RPM stockholders and adjusted EPS rose 13.2% and 12.2% from the prior year’s quarter to $227.69 million and $1.84, respectively.
Street expects RPM’s revenue for the fiscal year ending May 2025 to increase marginally year-over-year to $7.39 billion. Its EPS for the ongoing fiscal year is expected to rise 12.3% from the prior year to $5.55. Moreover, the company topped the consensus EPS estimates in three of the four trailing quarters.
RPM’s shares surged 23.8% over the past six months and 33% over the past year to close the last trading session at $138.72.
RPM’s solid prospects are projected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
RPM has an A grade for Quality and a B for Sentiment. Within the Chemicals industry, it is ranked #33 out of 80 stocks.
Click here to access RPM’s ratings for Growth, Momentum, Value, and Stability.
Stock #1: Eastman Chemical Company (EMN)
EMN is a global specialty materials company that produces a variety of products used in everyday items. The company operates across four segments: Advanced Materials; Additives & Functional Products; Chemical Intermediates; and Fibers.
EMN’s trailing-12-month EBITDA margin of 18.02% is 9.5% higher than the industry average of 16.46%. Its trailing-12-month levered FCF margin of 5.46% is 7.4% higher than the sector average of 5.09%. Furthermore, the stock’s trailing-12-month net income margin of 9.47% is 87.8% higher than the 5.04% industry average.
For the fiscal 2024 third quarter that ended September 30, EMN’s sales increased 8.7% year-over-year to $2.46 billion. Its gross profit grew 25% from the year-ago value to $605 million. Plus, non-GAAP net earnings attributable to EMN and non-GAAP EPS rose 52% and 53.7% from the prior year’s quarter to $266 million and $2,26, respectively.
The consensus revenue and EPS estimates of $2.28 billion and $1.61 for the fiscal fourth quarter ending December 2024 exhibit a year-over-year rise of 3.4% and 22.9%, respectively. Furthermore, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Shares of EMN have surged 18.2% over the past nine months and 20.5% over the past year to close the last trading session at $102.94.
EMN’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
EMN has a B grade for Value. Within the same industry, EMN is ranked #25 out of 80 stocks.
Click here to access EMN’s Momentum, Sentiment, Quality, Growth, and Stability ratings.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
RPM shares were unchanged in premarket trading Wednesday. Year-to-date, RPM has gained 26.32%, versus a 28.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
3 Specialty Chemical Companies Meeting Unique Industry Needs StockNews.com
