In the realm of chemical stocks, Celanese (CE), Eastman Chemical (EMN), and PPG Industries (PPG) have been under scrutiny amidst supply chain disruptions and rising costs since 2021. The chemical industry anticipated a market rebound in 2023, but global demand remained sluggish, hampering growth prospects. With a meager 1% year-over-year increase in chemical output in the first eight months of 2023, companies focused on cost reduction and process enhancement to counter the output decline.
Looking ahead, the American Chemistry Council projects stable capital spending for the U.S. chemical sector in 2024, with a projected growth rate of 3% to 4% in 2025 and 2026. However, the allocation of this capital will be crucial for companies to maintain their competitive edge in the industry.
The shift towards renewable energy sources presents opportunities for chemical firms, as oil and gas companies venture into chemicals, minerals mining, and agriculture to bolster clean energy supply chains. While this diversification offers new avenues, it also intensifies competition with established industries boasting robust cash flows.
On the regulatory front, the U.S. Environmental Protection Agency (EPA) recently finalized a rule to enhance risk evaluations on chemicals under the Toxic Substances Control Act (TSCA). These improvements aim to ensure comprehensive risk assessments of chemicals, safeguarding public health, employee well-being, and community safety.
For investors seeking an objective framework to evaluate companies, AAII's A+ Stock Grades offer a comprehensive analysis across five key factors: value, growth, momentum, earnings estimate revisions, and quality. Let's delve into the assessment of Celanese, Eastman Chemical, and PPG Industries based on these metrics.
Celanese (CE)
Celanese, a global chemical and specialty materials company, produces engineered polymers for diverse applications. With a Value Grade of C, an Earnings Estimate Revisions Grade of D, and a Quality Grade of B, Celanese demonstrates average value, negative earnings estimate revisions, and strong quality metrics.
Eastman Chemical (EMN)
Eastman Chemical, a specialty materials firm, excels in quality with an A grade, showcasing robust buyback yield, Z-Score, and return on assets. The company also boasts a strong Momentum Grade of B and a Value Grade of B, indicating good value. However, its Growth Grade of C reflects average growth performance.
PPG Industries (PPG)
PPG Industries, a manufacturer of paints, coatings, and specialty materials, operates in the performance coatings and industrial coatings segments. The company's performance coatings brands include PPG, Glidden, and Comex. PPG's financial performance and stock grades were not detailed in the provided excerpt.
