Top 3 Accelerating Chemical Stocks to Consider The chemical industry is well-positioned for significant long-term growth thanks to sustained demand across diverse sectors, a shift toward sustainability and green chemistry, and rapid digital transformation. So, it could...
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The chemical industry is well-positioned for significant long-term growth thanks to sustained demand across diverse sectors, a shift toward sustainability and green chemistry, and rapid digital transformation. So, it could be wise to invest in top chemical stocks NewMarket (NEU), Mitsubishi Chemical Group (MTLHY), and ChromaDex (CDXC) for substantial gains. Keep reading….
Chemicals have extensive application across various industries and, hence, are fundamental to the nation's economy. In addition, ongoing trends such as a growing shift toward sustainability and rapid digitalization and Industry 4.0 would propel the chemical sector's prospects.
Given the industry's bright outlook, it could be ideal to consider investing in fundamentally sound chemical stocks NewMarket Corporation (NEU), Mitsubishi Chemical Group Corporation (MTLHY), and ChromaDex Corporation (CDXC) for accelerating returns.
The U.S. holds a substantial position in the global regime as the world's largest national producer of chemical products. The chemical sector in the U.S. is responsible for converting raw materials into more than 70,000 diverse products necessary for modern life; these products are distributed to around 750,000 end users throughout the nation.
The chemical industry accounts for about 25% of the U.S. GDP as it supports the production of almost all commercial and household goods and is essential to economic growth. The employment generations from the chemical market are also significantly contributing to the overall growth of the economy.
The American Chemistry Council expects that capital spending in the U.S. chemical industry will remain stable in 2024 before ramping up to a growth rate of 3% to 4% annually in 2025-2026.
In the near future, the energy transition will generate a wave of manufacturing activities that rely on chemicals and materials for support. Some of the critical factors investigated for 2024 growth are the regional competitive landscape, circular economy, sustainability and trust, and digital and artificial intelligence.
The global chemicals market size is expected to grow from $5.11 trillion in 2023 to $5.57 trillion in 2024 at a CAGR of 9%. Further, the market is anticipated to reach a volume of $7.79 trillion by 2028, growing at a CAGR of 8.7%.
The growth in the forecast period is attributable to factors like evolving consumer preferences, renewable and bio-based materials, and health and safety prioritization. Major trends like smart manufacturing and Industry 4.0, sustainability and green chemistry, and advanced materials and nanotechnology will boost the market's expansion.
In recent years, demand for specialized performance chemicals from the agrochemical industry has been surging. They are used in several applications across the industrial, cosmetics, construction, electronics, and mining sectors. The specialty chemicals market is estimated to total $937.28 billion by 2028, expanding at a CAGR of 4.9%.
In light of these encouraging trends, let's look at the fundamentals of the three best Chemicals stocks, beginning with number 3.
Stock #3: NewMarket Corporation (NEU)
NEU engages in the manufacture and sale of petroleum additives. It provides lubricant additives for use in vehicle and industrial applications, engine oil additives designed for passenger cars, driveline additives for products like transmission fluids, and industrial additives designed for products for industrial applications consisting of hydraulic fluids.
On January 17, NEU completed the acquisition of AMPAC Intermediate Holdings, LLC, the parent company of American Pacific Corporation (AMPAC), for nearly $700 million. Located in Cedar City, Utah, AMPAC is the leading North American manufacturer of critical performance additives used in solid rocket motors for space launch and military defense applications.
"While we remain committed to our core petroleum additives business, we are also committed to identifying terrific opportunities outside of the petroleum additives business that meet our M&A and diversification criteria. We think the acquisition of AMPAC is a great example of that approach," said NEU's Chairman and CEO, Thomas E. Gottwald.
On October 26, NEU's Board of Directors declared a quarterly dividend of $2.25 per share on the common stock of the Corporation. The dividend was paid on January 2, 2024, to NEU's shareholders of record at the close of business on December 15, 2023.
NEU pays an annual dividend of $9, which translates to a yield of 1.53% at the current share price. Its four-year average dividend yield is 2.20%. Moreover, the company's dividend payouts have increased at a CAGR of 5.2% over the past three years. NewMarket has raised its dividends for five consecutive years.
In the fiscal year that ended December 31, 2023, NEU reported a net sales of $2.70 billion. Its income before income tax expense increased 40.6% from the prior year to $488.96 million. Also, its net income grew 39.1% year-over-year to $388.86 million. Its earnings per share came in at $40.44, up 45.6% from the previous year.
As of December 31, 2023, the company's cash and cash equivalents came in at $111.94 million, compared to $68.71 million as of December 31, 2022.
NEU's stock gained 26.1% over the past six months and 63.0% over the past year to close the last trading session at $582.83.
NEU's robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality and a B for Stability and Sentiment. NEU is ranked #8 of 84 stocks within the Chemicals industry.
To see additional POWR Ratings of NEU for Growth, Value, and Momentum, click here.
Stock #2: Mitsubishi Chemical Group Corporation (MTLHY)
Headquartered in Tokyo, Japan, MTLHY offers performance products, chemicals, industrial gases, health care products, and other products internationally. It provides polyester films for various applications, industrial materials, and packaging materials for food and other products. It also offers high-performance engineering plastics.
On January 26, MTLHY announced the commencement of full-fledged verification testing for the world's first commercialization of polycarbonate resin chemical recycling. The company is conducting testing to collect polycarbonate resin from the headlamps of end-of-life vehicles.
The testing is being conducted in collaboration with Tokio Marine & Nichido and ABT Corporation.
On January 25, MTLHY announced that its DURABIO™ plant-derived bioengineering plastic product was chosen by Panasonic Entertainment & Communication Co., Ltd. for its Technics True Wireless Earbuds EAH-AZ80, which were placed on the market on June 15, 2023. The earbuds are the first product in their category to adopt the material.
MTLHY will continue to supply high-value-added performance products through developing DURABIO™ alongside contributing to the realization of a sustainable society.
For the nine months that ended December 31, 2023, MLTHY reported a sales revenue of ¥3.24 trillion ($21.84 billion). The company's gross profit increased marginally year-over-year to ¥856.04 billion ($5.76 billion). Its operating income grew 337% from the year-ago value to ¥212.50 billion ($1.43 billion).
In addition, the company's net income and EPS came in at ¥144.27 billion ($971.18 million) and ¥69.88, up 222.0% and 505.0% from the prior year's period, respectively.
Analysts expect MTLHY's revenue for the fiscal year (ending March 2024) to increase 3382.8% year-over-year to $30.31 billion. Likewise, the company's revenue for the fiscal year 2025 is expected to grow 2.9% from the prior year to $31.20 billion.
Over the past six months, the stock has gained 1.6% and 11.4% over the past year to close the last trading session at $29.80.
MTLHY's POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Value and Stability and a B for Quality. Within the Chemicals industry, MTLHY is ranked #2 out of 84 stocks.
Click here to access the other ratings of MTLHY for Growth, Momentum, and Sentiment.
Stock #1: ChromaDex Corporation (CDXC)
CDXC operates as a bioscience company that focuses on developing healthy aging products. It operates through three segments: Consumer Products; Ingredients; and Analytical Reference Standards and Services. The company researches nicotinamide adenine dinucleotide (NAD+) and provides finished dietary supplement products.
On December 12, 2023, CDXC partnered with Neurohacker Collective, an acclaimed American science team that has been formulating advanced nutritional supplements since 2015, to create an NAD+ supplement called Qualia NAD+ that tackles the challenge of boosting NAD+ levels in aging Americans.
ChromaDex Senior Vice President of Business Development, Jason Campbell said: "Created with the highest scientific rigor and quality standards, our patented Niagen NR ingredient is the most efficient precursor available because it can cross the cell membrane directly."
On November 1, CDXC launched its clinical strength Tru Niagen® Pro 1,000mg, featuring 1,000mg of Niagen® (patented Nicotinamide Riboside or NR), one of the most efficient and superior quality NAD+ precursors on the market, to consumers nationwide.
Tru Niagen® Pro 1,000mg is recommended by physicians and is used by pro athletes as a clinically proven alternative to boost NAD+ levels by up to 150% in just three weeks.
During the third quarter that ended September 30, 2023, CDXC's sales increased 14.2% year-over-year to $19.49 million. The company's gross profit rose 17.3% from the year-ago value to $11.97 million. Its adjusted EBITDA came in at $504 thousand, compared to a negative adjusted EBITDA of $1.21 million in the prior year's quarter.
Also, the company's cash and cash equivalents were $26.77 million as of September 30, 2023, compared to $20.44 million as of December 31, 2022.
Street expects CDXC's revenue for the fiscal year (ended December 2023) to grow 15.4% year-over-year to $83.16 million. For the first quarter ending March 2024, its revenue is expected to increase 4.7% year-over-year to $23.62 million. Further, the company has surpassed the consensus EPS estimates in all trailing four quarters, which is remarkable.
Shares of CDXC have surged 5.4% over the past month to close the last trading session at $1.55.
CDXC's sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
CDXC has an A grade for Sentiment and a B for Value and Quality. It is ranked first among 84 stocks in the same industry.
Click here to access additional CDXC ratings for Growth, Stability, and Momentum.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MTLHY shares were unchanged in premarket trading Tuesday. Year-to-date, MTLHY has declined -0.90%, versus a 3.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.
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