The U.S. chemical industry is expected to see solid growth this year despite the ongoing supply constraints, as it benefits from inventory rebuilding, strong demand across sectors, and a competitive advantage in natural gas-based chemistries.
“Following several years of weak growth related to trade tensions, COVID-19, and disruptive weather events, chemical output is looking to have its best year in more than a decade in 2022, with expansion across all chemistries,” said Martha Moore, American Chemistry Council’s (ACC) chief economist, and managing director.
Furthermore, the industry is expected to witness increased investment as leading players focus on building capacity and sustainability. In addition, advancements in technologies should help accelerate growth. ACC expects U.S chemical output to grow by 4.1% and capital spending to jump 12.3% to $34.50 billion in 2022.
Given this backdrop, quality chemical stocks Valhi, Inc. (VHI), Kuraray Co., Ltd. (KURRY), Mitsubishi Chemical Holdings Corporation (MTLHY), AdvanSix Inc. (ASIX), and The Chemours Company (CC), which are currently trading at significant discounts to their peers, could be ideal investments now.
Valhi, Inc. (VHI)
VHI engages in the chemicals, component products, and real estate management and development businesses in the Asia Pacific, Europe, North America, and internationally.
VHI’s total net sales increased 23.6% from the prior-year quarter to $629 million in the fiscal first quarter ended March 31, 2022. Total operating income for the quarter came in at $100.70 million, reflecting an increase of 96.3% year-over-year, while the net income attributable to VHI stood at $45.40 million, up 206.8% year-over-year. Its net income per share increased 205.8% from its year-ago value to $1.59.
Analysts expect VHI’s EPS for the fiscal quarter ending June 2022 to come in at $2.01, indicating an increase of 168% year-over-year. Also, the company’s EPS is expected to grow 114.6% year-over-year to $9.57 in the ongoing fiscal year.
In terms of its forward non-GAAP P/E, VHI is currently trading at 4.53x, 55.7% lower than the industry average of 10.24x. Its trailing-12-month EV/EBITDA multiple of 4.23 is 39.9% lower than the industry average of 7.04.
VHI gained 75.9% over the past year to close the last trading session at $43.36.
VHI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VHI also has an A grade in Growth and Value and a B in Sentiment and Quality. It is ranked #1 of 92 stocks in the A-rated Chemicals industry.
Beyond what is stated above, we’ve also rated VHI for Momentum and Stability. Get all the VHI ratings here.
Kuraray Co., Ltd. (KURRY)
Headquartered in Tokyo, Japan, KURRY produces and sells resins, chemicals, fibers, and other businesses worldwide. It operates through five segments, Vinyl Acetate, Isoprene, Functional Materials, Fibers and Textiles, and Trading.
For the fiscal quarter ended March 2022, KURRY’s net sales increased 16% year-over-year to ¥167.56 billion ($1.24 billion). Its gross profit grew 19.7% from the year-ago value to ¥56.74 billion ($0.42 billion).
Operating income for the quarter stood at ¥22.15 billion ($0.16 billion), reflecting a 31.9% increase year-over-year. Moreover, its net income was ¥13.18 billion ($0.10 billion), up 133.3% from the prior-year quarter.
Street expects KURRY’s revenue in the ongoing fiscal year to come in at $5.12 billion, indicating an increase of 134.2% year-over-year. The company also surpassed the consensus EPS estimates in three of the trailing four quarters.
In terms of its forward EV/EBITDA, KURRY is currently trading at 4.42x, 28.7% lower than the industry average of 6.20x. Its forward Price/Sales multiple of 0.56 is 53.9% lower than the industry average of 1.21.
KURRY’s stock slumped marginally intraday to close the last trading session at $25.60.
KURRY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our proprietary rating system.
The company also has an A grade in Value and Stability and a B in Growth. The stock is ranked #5 in the same industry. To get KURRY’s ratings for Momentum, Quality, and Sentiment, click here.
Mitsubishi Chemical Holdings Corporation (MTLHY)
Headquartered in Tokyo, Japan, MTLHY provides performance products, chemicals, industrial gases, health care products, and other products in Japan and internationally.
On May 30, 2022, MTLHY announced the development of a resource-recycling (Label to Label) shrink sleeve label for plastic bottles through a joint demonstration project with Fuji Seal, Inc.
This technology will be adopted for the first time in Japan for Yasai Seikatsu 100 Original (720 ml), a Kagome Co., Ltd product. The company expects this to help in resource recycling and GHG emissions reduction.
MTLHY’s sales revenue increased 22.1% year-over-year to ¥3,976.95 billion ($29.46 billion) in the fiscal year ended March 31, 2022. Its net income grew 821.6% from the year-ago value to ¥209.41 billion ($1.55 billion), while its EPS improved by 2,262.2% year-over-year to $115.03.
MTLHY’s revenue for the fiscal quarter ending September 2022 is expected to improve 0.3% year-over-year to $8.42 billion. Also, the consensus revenue estimate of $32.59 billion for the ongoing fiscal year indicates an increase of 6% year-over-year.
In terms of its forward E.V./Sales, MTLHY is currently trading at 0.76x, 46.1% lower than the industry average of 1.42x. Its forward Price/Sales multiple of 0.25 is 79.2% lower than the industry average of 1.21.
MTLHY’s shares have slumped 6.3% over the past month to close the last trading session at $28.59.
The company has an overall rating of A, translating to Strong Buy in our proprietary rating system. MTLHY is also rated A in Value and Stability and a B in Quality. Within the same industry, it is ranked #7.
Click here to see additional POWR Ratings for Growth, Momentum, and Sentiment for MTLHY.
AdvanSix Inc. (ASIX)
ASIX manufactures and sells polymer resins directly as well as through distributors in the United States and internationally.
ASIX’s sales increased 27.3% year-over-year to $479.07 million in the fiscal first quarter of 2022. Its net income improved 124.2% year-over-year to $63.07 million over the period, while its adjusted EBITDA and EPS increased 79.1% and 115.2% from its year-ago values to $103.16 million and $2.26, respectively.
Analysts expect ASIX’s EPS for the fiscal quarter ending June 2022 to come in at $2.41, indicating an increase of 57.5% year-over-year. The company’s revenue is expected to grow 27.4% year-over-year to $557.50 million in the same period. ASIX also beat the consensus EPS estimates in three of the trailing four quarters, which is impressive.
In terms of its forward P/E, ASIX is currently trading at 4.46x, 58.4% lower than the industry average of 10.71x. Its forward E.V./Sales multiple of 0.62 is 56.5% lower than the industry average of 1.42.
ASIX’s shares have slumped 22.9% over the past month to close the last trading session at $33.79.
It is no surprise that ASIX has an overall rating of A, equating to Strong Buy in our POWR Ratings system. The stock also has an A grade in Value and a B in Growth. In the Chemicals industry, ASIX is ranked #10.
In addition to the POWR Rating grades I’ve just highlighted, you can see the ASIX’s ratings for Momentum, Quality, Sentiment, and Stability here.
The Chemours Company (CC)
CC provides performance chemicals in North America, the Asia Pacific, Europe, the Middle East, Africa, and Latin America. It operates through four segments, Titanium Technologies; Thermal & Specialized Solutions; Advanced Performance Materials; and Chemical Solutions.
On June 3, the company announced that it is exploring capacity investments across the United States and Europe to advance support to its growing Hydrogen Economy Business. The company expects this increased capacity to support the rising demand for water electrolysis and fuel cell technology.
On May 25, CC announced the innovation of an industry-leading sustainable process to produce Advanced Polymer Architecture (APA) grade Viton™ fluoroelastomers without using a fluorinated polymerization aid.
“This new process to produce APA grade Viton™ fluoroelastomers without the use of a fluorinated polymerization aid builds upon our legacy of product innovation and industry leadership,” said Denise Dignam, President of Advanced Performance Materials at Chemours.
CC’s net sales increased 22.8% year-over-year to $1.76 billion in the fiscal quarter ended March 31, 2022. Its gross profit grew 63.6% from the year-ago value to $486 million. The company’s net income increased 143.8% year-over-year to $234 million. Also, its net income per share came in at $1.43, up 150.9% from the prior-year quarter.
The consensus EPS estimate of $1.42 for the fiscal quarter ending June 2022 indicates an increase of 17.9% year-over-year. Its revenue is expected to grow 11% year-over-year to $1.84 billion in the same period. CC also beat the consensus EPS estimates in three of the trailing four quarters.
In terms of its forward Price/Sales, CC is currently trading at 0.69x, 42.5% lower than the industry average of 1.21x. Its forward P/E multiple of 5.99 is 44% lower than the industry average of 10.71.
The stock has gained 12.7% over the past nine months to close the last trading session at $31.59.
CC’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, translating to Strong Buy in our proprietary rating system.
CC is also rated A in Value and a B in Growth and Quality. The stock is ranked #12 in the same industry. To see additional POWR Ratings for Momentum, Stability, and Sentiment for CC, click here.
VHI shares were unchanged in premarket trading Tuesday. Year-to-date, VHI has gained 51.54%, versus a -22.73% 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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