The chemicals industry is anticipated to remain strong in the foreseeable future, thanks to its diverse applications, evolution of consumer preferences, and incorporation of cutting-edge technologies. So, investors could consider investing in quality chemical stocks Oil-Dri Corporation of America (ODC), Akzo Nobel N.V. (AKZOY), Kuraray Co., Ltd. (KURRY), and ChromaDex Corporation (CDXC), which are poised for enormous growth.
The chemical industry plays a vital role in various sectors, such as agriculture, healthcare, manufacturing, and construction, leading to consistent demand for chemical products. Moreover, the growing demand from applications like packaging and the automobile industry is expected to be a major driver of market expansion.
Last year, the global chemicals market was valued at $4726.1 billion, contributing 4.6% to the global GDP.
Looking ahead, The Global Market Model's recent forecast for the chemical industry indicates sustained growth over the next decade, with a projected CAGR of 8.8% until 2032.
In addition, the specialty chemicals market is on the rise, driven by greater demand for pharmaceuticals, food additives, and flavors and fragrances. Also, the surging demand for specialty fueled by advancements in process technology and trade liberalization is driving the specialty chemical market.
Besides, changing consumer preferences for unique flavors and culinary experiences, along with the popularity of processed foods, are boosting market growth, especially in developed nations.
As a result, the global specialty chemicals market is expected to grow at a CAGR of 5.1% from 2023 to 2030.
Furthermore, Artificial intelligence (AI) is significantly impacting the chemical industry by transforming value chain management, driving innovation, enhancing productivity, and providing new opportunities for industry growth.
The United States wields significant influence in the AI sector due to its high investment attractiveness and continues to dominate the industry in terms of both transaction share and overall funding.
The global artificial intelligence (AI) in the chemicals market is expected to be worth around $16.94 billion by 2032, with a remarkable CAGR of 31.9%.
Given the industry tailwinds, it's time to examine the fundamentals of the top four stocks to watch in the Chemicals industry, starting with the third in line.
Stock #4: Oil-Dri Corporation of America (ODC)
ODC develops, manufactures, and markets sorbent products in the United States and internationally. It operates in two segments, Retail and Wholesale Products Group; and Business to Business Products Group.
Over the past three years, ODC has experienced remarkable expansion, with EBIT and EBITDA growing at a CAGR of 63.8% and 33.1%. Additionally, its normalized net income and EPS have exhibited a CAGR of 57.8% and 9.2% during the same period.
On October 4, ODC declared quarterly cash dividends of $0.29 per share of the Company’s Common Stock and $0.218 per share of the Company’s Class B Stock, payable on November 24, 2023. The Company has paid cash dividends continuously since 1974 and has increased dividends annually for twenty consecutive years.
The company pays an annual dividend of $1.16, which translates to a yield of 2.07% at the current price level. It has a four-year average dividend yield of 3.04%.
ODC’s net sales increased 15.3% year-over-year to $107.39 million in the fiscal fourth quarter, which ended July 31, 2023. Its gross profit rose 74.1% from the previous-year quarter to $30.43 million and operating income grew 96% year-over-year to $12.71 million.
Its net income came in at $11.92 million, up 129.7% from the previous-year quarter. Also, its net income share rose 116.9% year-over-year to $1.67,
The stock has gained 90.1% over the past year and 35.4% over the past six months to close the last trading session at $62.08.
ODC’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
ODC also has a B grade for Growth, Stability, and Sentiment. It is ranked #6 in the 83-stock Chemicals industry.
To access ODC’s additional POWR Ratings for Momentum, Value, and Quality, click here.
Stock #3: Akzo Nobel N.V. (AKZOY)
Headquartered in Amsterdam, the Netherlands, AKZOY engages in the production and sale of paints and coatings worldwide. It offers decorative paints, a range of mixing machines, color concepts for the building and renovation industry, and specialty coatings.
AKZOY’s revenue has grown at a CAGR of 7.9% over the past three years. Its EBIT and EBITDA have shown impressive growth, expanding at 6.9% and 5.6% CAGR over the past five years.
On September 28, AKZOY showcased sustainable paints and coatings solutions for green buildings at the International Greenbuild Conference in Washington, D.C. The company emphasized the importance of circularity and discussed its innovations with other sustainability experts. AKZOY is actively involved in green building initiatives and is a member of various green building councils.
AKZOY pays $0.31 as dividends annually, which translates to a yield of 1.41% on the current market price. Its four-year average dividend yield is 3.44%.
AKZOY’s revenue for the fiscal third quarter ended September 30, amounted to €2.74 billion ($2.90 billion). Its gross profit increased 14.7% year-over-year to €1.12 million ($1.19 billion). Additionally, its adjusted EPS from continuing operations came in at €0.99.
AKZOY’s EPS for the fiscal year 2023 is expected to increase 51.2% year-over-year to $1.32. Its revenue for the current year is estimated to be $11.33 billion.
Over the past year, the stock has gained 5.1% to close the last trading session at $22.50.
AKZOY’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Growth and Stability and a B for Quality. It is ranked #5 in the same industry.
Beyond what we stated above, we have also given AKZOY grades for Value, Momentum, Sentiment, and Quality. Get access to all the ratings here.
Stock #2: Kuraray Co., Ltd. (KURRY)
Headquartered in Tokyo, Japan, KURRY engages in the manufacture and sale of chemicals. It operates through five business segments: Vinyl Acetate segment; Isoprene segment; Functional Materials segment; Textile segment; and Trading segment.
KURRY has seen impressive growth in the past three years, as its EBIT and EBITDA have surged at a CAGR of 25.2% and 14.7%. Moreover, its revenue and normalized net income also grew at a CAGR of 12.3% and 27.5% over the past three years.
On October 6, KURRY announced the development of PVA hydrogel microcarriers for cell cultures in regenerative medicine. These microcarriers provide a damage-resistant, debris-free, and efficient environment for cell growth in bioreactors.
The product will be available from January 2024 in Japan and the United States. This development addresses the need for suitable microcarriers in regenerative medicine, where strict standards for foreign matter exclusion and stem cell proliferation are essential.
On August 9, KURRY announced its decision to boost ethylene vinyl alcohol copolymer (EVAL) production in the U.S. and Europe. A total of 5,000 tons/year will be added to the capacity of U.S. and European bases of operation in 2024, with another 5,000 tons/year to be added in 2026. The 10,000-tons/year total capacity increase would boost global production capacity from 103,000 tons/year to 113,000 tons/year.
With a four-year average dividend yield of 3.73%, the company pays an annual dividend of $1.04, which translates to a yield of 2.99% on the prevailing price level.
In the fiscal second quarter of 2023 that ended June 30, 2023, KURRY’s net sales stood at ¥381 billion ($2.55 billion), up 6.4% year-over-year. Its gross profit and operating income stood at ¥119.83 billion ($801.98 million) and ¥40.97 billion ($274.20 million), up 8.2% and 7.6% from the year-ago quarter, respectively. Its net income stood at ¥22.04 billion ($147.50 million).
Analysts expect KURRY’s revenue to rise 3.8% year-over-year to $1.38 billion in the fiscal third quarter that ended September 2023.
The stock gained 68.3% over the past year to close its last trading session at $34.61. Over the past nine months, the stock has returned 24.7%.
KURRY’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
KURRY has an A grade for Stability and a B for Growth and Value. It is ranked #4 within the same industry.
In addition to the POWR Ratings stated above, one can access KURRY’s Momentum, Sentiment, and Quality ratings here.
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.
CDXC’s revenue and total assets have shown strong growth, with 13.9% and 8.2% CAGRs over the past three years.
On October 26, CDXC announced that the company and Zesty Paws were teaming up to introduce a new pet supplement called Healthy Aging NAD+ Precursor, which contains CDXC's Niagen. This product aims to promote metabolic health, cellular energy, and repair for dogs, targeting the growing longevity market.
On August 8, CDXC announced that it had chosen iHerb as its global retail partner to distribute Tru Niagen. iHerb, known for its extensive international presence, operates in over 180 countries, with 90% of its sales coming from overseas customers.
This strategic partnership is expected to accelerate the global expansion of Tru Niagen, leveraging iHerb's broad international customer base and positioning CDXC for significant financial growth.
During 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 quarter 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.
The company’s revenue for the fiscal third quarter that ended September 2023 is expected to increase 19.4% year-over-year to $20.74 million. The company has surpassed the EPS estimates in each of the trailing four quarters.
The stock has gained marginally over the past five days, closing the last trading session at $1.32.
CDXC’s solid outlook is reflected 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 is ranked first in the same industry.
Click here to access additional CDXC ratings for Stability and Momentum.
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AKZOY shares were trading at $22.62 per share on Tuesday morning, up $0.12 (+0.53%). Year-to-date, AKZOY has gained 3.08%, versus a 9.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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