In the foreseeable future, the chemical industry is poised for substantial growth and transformation, propelled by robust demand across various end-use sectors, the incorporation of cutting-edge digital technologies, and favorable government initiatives heralding a paradigm shift in the domain.
Considering the industry’s bright growth prospects, it could be wise to invest in fundamentally sound chemical stocks PPG Industries, Inc. (PPG), NewMarket Corporation (NEU), and ChromaDex Corporation (CDXC) which are garnering significant investor interest at present. Let’s understand this in detail.
The chemical industry, a cornerstone of American manufacturing, plays a pivotal role in sectors such as automotive, agriculture, healthcare, construction, textiles, and electronics. It contributes over 25% to the national GDP, crucial for the production of most commercial and household goods, driving economic growth.
Signed into law by President Joe Biden in August of the previous year, the Inflation Reduction Act (IRA) is poised to create further abundant prospects for the U.S. chemical industry. As the Act creates provisions for energy transition toward the country’s net-zero agenda, the chemical industry stands to benefit from these incentives.
Moreover, in the realm of global chemical production, there is a growing reliance on digital technologies such as Artificial Intelligence (AI) and Machine Learning (ML). These technologies empower advancements in materials, accelerate cost-effective formulations, enhance supply chain efficiency, and foster sustainability initiatives.
Additionally, chemical companies can position their products as solutions aligning with the IRA's emissions reduction goals, fostering industry growth. According to a report by ReportLinker, the global chemicals market is expected to grow to $6.85 trillion in 2027, accelerating at a 7.8% CAGR.
In light of these encouraging trends, let's look at the fundamentals of the three best Chemicals stocks, beginning with number 3.
Stock #3: PPG Industries, Inc. (PPG)
PPG manufactures and distributes paints, coatings, and specialty materials. Its segments include Performance Coatings and Industrial Coatings. The company also offers coatings for metal cans, plastic tubes, and more. Additionally, PPG provides precipitated silica, TESLIN substrates, and optical materials for diverse end-uses.
On September 14, PPG successfully concluded a $2.7 million expansion project at its Sumaré, Brazil-based powder coatings plant, boosting production capacity by 40%. This investment aligns with PPG's strategy to enhance five powder coatings manufacturing units across the United States and Latin America.
PPG's dedication to addressing the surging global demand for powder coatings entails substantial investments in research and development, facility expansion, and acquisitions, thereby bolstering its growth prospects.
On August 2, PPG unveiled its center of excellence at its Quattordio, Italy site, representing a $2.6 million investment. The center integrates automotive color development and application, drastically reducing lead times for introducing new colors, cost optimization, and enhancing color performance.
PPG will leverage digital tools to streamline and modernize processes, ushering in a new era of color development. This facility is pivotal in meeting customer demands for speed, precision, and quality, promising substantial benefits for the company.
For the second quarter that ended June 30, 2023, PPG’s net sales increased 3.9% year-over-year to $4.87 billion. The net income and earnings per common share attributable to PPG grew 11.1% and 11.4% from the prior year’s period to $490 million and $2.06, respectively.
In addition, as of June 30, 2023, the company’s current assets stood at $8.07 billion, compared to $7.17 billion as of December 31, 2022. Moreover, cash and cash equivalents were $1.23 billion as of June 30, 2023, up from $1.10 billion as of December 31, 2022.
The consensus revenue estimate of $18.18 billion for the fiscal year ending December 2023 reflects a 3% rise year-over-year. Likewise, the consensus EPS estimate of $7.49 for the current fiscal year indicates a 23.8% year-over-year improvement. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters.
PPG’s shares have gained 11.1% over the past year to close the last trading session at $133.80.
PPG’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
PPG has a B grade for Growth, Sentiment, and Quality. It has ranked #11 in the 83-stock Chemicals industry.
In addition to the POWR Ratings I’ve just highlighted, you can see PPG’s ratings for Value, Stability, and Momentum here.
Stock #2: NewMarket Corporation (NEU)
NEU manufactures and sells petroleum additives. Its product range includes lubricant additives designed for vehicles and industrial applications. The company also offers fuel additives that improve the performance of gasoline, diesel, biofuels, and other fuels, catering to the government, OEMs, and individuals.
On August 3, NEU approved a quarterly dividend of $2.25 per share on the company's common stock. This dividend will be payable on October 2, 2023, to NEU shareholders recorded as of September 15, 2023. This represents the company's financial stability and confidence in its earnings to distribute profits to shareholders.
The company has increased its dividends for the past four years. It pays a $9.00 per share dividend annually, which translates to a 1.99% yield on the current price level. Its dividend has grown at a 4.6% CAGR over the past three years, and its four-year average dividend yield is 2.18%.
For the second quarter that ended June 30, 2023, NEU’s gross profit grew 24.2% year-over-year to $195.64 million. Its EBITDA increased 37.1% from the prior year’s period to $154.86 million. In addition, NEU’s net income and EPS stood at $99.62 million and $10.36, up 49.9% and 58.4% year-over-year, respectively.
The company’s EPS is expected to grow 7.7% per annum over the next five years. The stock has gained 52% over the past year, closing the last trading session at $451.74.
NEU’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
NEU has a B grade for Value, Stability, Quality, and Sentiment. It is ranked #2 out of 83 stocks within the same industry.
Click here to access the additional NEU ratings (Growth and Momentum).
Stock #1: ChromaDex Corporation (CDXC)
CDXC is dedicated to healthy aging product development. Its segments include Consumer products; Ingredients; and Analytical Reference Standards and Services. The company researches NAD+, produces dietary supplements with proprietary ingredients, and supplies these ingredients to consumer product manufacturers.
On August 8, CDXC appointed iHerb, a leading online health and wellness destination, as its new global retail partner for distributing Tru Niagen. iHerb, renowned for its international reach, serves customers in over 180 countries, with 90% of sales originating abroad.
The partnership should pave the way for Tru Niagen's rapid global expansion, capitalizing on iHerb's extensive international customer base and positioning CDXC for substantial financial growth.
On February 22, CDXC announced an expansion of its patent portfolio with the addition of U.S. Patent 11,584,770, focusing on the purity compositions of dihydronicotinamide riboside (NRH) and dihydronicotinic acid riboside (NARH). CDXC possesses a portfolio comprising over 60 patents, including Niagen® and other NAD+ precursors.
By securing patents for purity compositions and applications in food, dietary supplements, and pharmaceuticals, the company gains a competitive edge and the potential to generate revenue through licensing agreements, partnerships, or sales of these patented products.
Additionally, the scientific interest in NRH as a potent NAD+ precursor could drive demand for the company's products, further enhancing its financial position and profitability.
For the second quarter that ended June 30, 2023, CDXC’s net sales increased 21.5% year-over-year to $20.32 million. Its gross profit grew 23% from the year-ago value to $12.36 million. In addition, the company’s adjusted EBITDA came in at $218 thousand, compared to a loss of $4.64 million in the previous year’s period.
Also, as of June 30, 2023, CDXC’s cash and cash equivalents came in at $26.41 million, compared to $20.44 million as of December 31, 2022.
The company’s revenue for the fiscal year ending December 2023 is expected to increase 17.1% year-over-year to $84.40 million. Similarly, analysts expect CDXC’s revenue for the next fiscal year to come in at $97.86 million, up 16% from the previous year. Over the past five days, the stock has plunged 4.6%, closing the last trading session at $1.47.
CDXC’s strong outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
CDXC has a B grade for Growth, Value, Quality, and Sentiment. It has topped the 83-stock Chemicals industry.
Click here to access additional CDXC ratings for Stability and Momentum.
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PPG shares were trading at $133.46 per share on Monday afternoon, down $0.34 (-0.25%). Year-to-date, PPG has gained 7.61%, versus a 17.09% 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.
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