The Russia-Ukraine conflict and extended COVID-19 lockdowns in China have intensified the supply chain disruption and led to surging raw materials prices. Moreover, the rising demand for basic materials for speeding up manufacturing and industrial activities has benefited the basic materials industry.
Moreover, the passage of the bipartisan infrastructure bill should significantly benefit this industry in the long run. The basic chemicals market, part of the broader materials market, is expected to grow at a 4.1% CAGR to reach $943 billion by 2030.
Therefore, fundamentally-sound basic materials stocks LyondellBasell Industries N.V. (LYB), Olin Corporation (OLN), The Chemours Company (CC), Westlake Corporation (WLK), and Alpha Metallurgical Resources, Inc. (AMR), which have rallied significantly amid intense market volatility but still have plenty of upsides left, could be ideal bets now.
LyondellBasell Industries N.V. (LYB)
LYB is an international chemical company that operates through Olefins & Polyolefins - Americas; Olefins & Polyolefins - Europe, Asia, International (EAI); Intermediates & Derivatives; Advanced Polymer Solutions; Refining; Technology; and Other segments. The company offers plastic, chemical, and fuel products to manufacture personal care products, fresh food packaging, lightweight plastics, construction materials, automotive components, durable textiles, medical applications, and biofuels.
On September 9, 2021, LYB obtained the International Sustainability and Carbon Certification (ISCC) PLUS certification for certain grades of polyethylene and polypropylene produced at four of its U.S. manufacturing sites. This allows LYB to extend its Circulen suite of products to customers in North America and offer mass balance certificates for these products. LYB would gradually ramp up production to meet growing demand over the coming years.
LYB’s sales and other operating revenues for its fiscal 2022 first quarter ended March 31, 2022, increased 44.9% year-over-year to $13.16 billion. The company’s operating income came in at $1.66 billion, representing a 52.7% year-over-year improvement. Its net income came in at $1.32 billion for the quarter, indicating a 23.4% rise from the prior-year period. LYB’s EPS increased 25.8% year-over-year to $4. The company had $1.79 billion in cash and cash equivalents as of March 31, 2022.
Analysts expect LYB’s revenue to grow 12.5% year-over-year to $51.96 billion for fiscal 2022 ending December 31, 2022. The company’s EPS is expected to grow at a 3.3% rate per annum over the next five years.
The stock’s 6.39x non-GAAP forward P/E is 42.9% lower than the 11.19x industry average. In terms of forward Price/Sales, LYB is currently trading at 0.67x, which is 45.1% lower than the 1.22x industry average. LYB’s trailing-12-month gross profit margin, EBITDA margin, and ROE are 18.7%, 18.2%, and 53.9%, respectively. The stock’s price has increased 16.5% year-to-date and closed yesterday’s trading session at $107.41.
LYB’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Value and a B grade for Quality and Sentiment. Click here to see the additional ratings for LYB’s Growth, Stability, and Momentum. LYB is ranked #29 of 89 stocks in the A-rated Chemicals industry.
Olin Corporation (OLN)
OLN manufactures and distributes chemical products and ammunition internationally. The company operates through Chlor Alkali Products and Vinyls; Epoxy; and Winchester segments. Its products are sold through its sales force, directly to various industrial customers, mass merchants, retailers, wholesalers, other distributors, and the U.S. Government and its prime contractors.
On April 28, 2022, OLN and Plug Power Inc. (PLUG), a leading developer of hydrogen fuel cell systems for use in electrical equipment and vehicles, signed an MOU to create a joint venture (JV) to produce and market green hydrogen to support growing fuel cell demand in the global hydrogen economy. OLN will provide reliable hydrogen production and operational support, while PLUG will market the hydrogen and provide logistical support for delivery. The first production plant in St. Gabriel, Louisiana will produce 15 tons per day (tpd) of green hydrogen. This JV helps OLN recognize the full potential of its untapped hydrogen supply capabilities across North America.
For its fiscal 2022 first quarter ended March 31, 2022, OLN’s sales increased 28.3% year-over-year to $2.46 billion. The company’s operating income came in at $546.50 million, representing a 43.4% rise from the prior-year period. Its net income came in at $393 million, up 61.3% from the year-ago period. OLN’s EPS increased 64.3% year-over-year to $2.48. The company had $197.90 million in cash and cash equivalents as of March 31, 2022.
Analysts expect the company’s EPS to hit $9.88 for its fiscal 2022 ending December 31, 2022, representing a 22% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $9.90 billion for the same fiscal year represents an 11.1% year-over-year improvement.
The stock’s 6.31x non-GAAP forward P/E is 43.7% lower than the 11.19x industry average. In terms of forward Price/Sales, OLN is currently trading at 0.94x, 23% lower than the 1.22x industry average. OLN’s trailing-12-month gross profit margin, EBITDA margin, and ROE are 26%, 28.2%, and 64.5%, respectively. The stock has gained 9.2% year-to-date and closed yesterday’s trading session at $62.79.
OLN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Sentiment. Click here to see the additional ratings for OLN (Momentum, Value, Stability, and Growth). OLN is ranked #20 in the Chemicals industry.
The Chemours Company (CC)
CC manufactures and distributes performance chemicals worldwide. The company produces titanium dioxide, refrigerants, industrial fluoropolymer resins, and specialty chemicals for gold production, oil refining, agriculture, and other industries. It serves various industries, including electronics, communications, automotive, wire and cable, energy, oil and gas, and aerospace.
On November 16, 2021, CC announced the launch of Glyclean D, a proven broad-spectrum disinfectant and cleaner registered with the U.S. Environmental Protection Agency (EPA) to deactivate the SARS-CoV-2 virus, other viruses, and bacteria. Unlike harsh, corrosive chemicals, such as quats or bleach, Glyclean D is biodegradable and friendlier to people and the environment. CC should witness high demand in the coming months.
CC’s net sales for its fiscal 2022 first quarter ended March 31, 2022, increased 22.8% year-over-year to $1.76 billion. The company’s gross profit came in at $486 million, representing a 63.6% rise from the prior-year period. Its pre-tax income came in at $280 million for the quarter, up 177.2% from the year-ago period. While its adjusted net income increased 99.2% year-over-year to $214 million, its adjusted EPS grew 105.6% to $1.46. The company had $1.15 billion in cash and cash equivalents as of March 31, 2022.
Analysts expect the stock’s EPS to improve 31% year-over-year to $5.24 for fiscal 2022 ending December 31, 2022. It surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $7.02 billion for the same fiscal year represents a 10.7% rise from the prior-year period. Its EPS is expected to grow at a rate of 14.5% per annum over the next five years.
CC’s 7.62x non-GAAP forward P/E is 31.6% lower than the 11.13x industry average. In terms of forward Price/Sales, CC is currently trading at 0.89x, 27% lower than the 1.22x industry average. The stock’s trailing-12-month gross profit margin, EBITDA margin, and ROE are 23.5%, 17.7%, and 73.9%, respectively. The stock has gained 20.8% year-to-date to close yesterday’s trading session at $40.53.
CC’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Value and a B grade for Growth and Quality.
In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for CC’s Stability, Sentiment, and Momentum here. CC is ranked #6 in the Chemicals industry.
Westlake Corporation (WLK)
WLK manufactures and supplies petrochemicals, polymers, and building products through Performance and Essential Materials; and Housing and Infrastructure Products segments worldwide. The company provides the building blocks for essential solutions, from housing and construction to packaging and healthcare, automotive, consumer, and industrial markets.
On March 23, 2022, the Pernis, Netherlands, site of WLK’s Westlake Epoxy business, received International Sustainability & Carbon Plus (ISCC+) certification for its tracing and handling of sustainable materials in the production of epoxy products. This is a significant step in Westlake Epoxy’s strategy to integrate renewable carbon materials into its raw material supply chain while reducing energy use and greenhouse gas emissions.
For its fiscal 2022 first quarter ended March 31, 2022, WLK’s net sales increased 72.1% year-over-year to $4.06 billion. The company’s gross profit came in at $1.29 billion, representing a 152.5% year-over-year improvement. Its income from operations came in at $1.03 billion for the quarter, up 198.3% from the prior-year period. WLK’s net income came in at $764 million, indicating a 202% rise from the year-ago period. Its EPS increased 211.8% year-over-year to $5.83. As of March 31, 2022, the company had $1.06 billion in cash and cash equivalents.
The stock’s 6.09x non-GAAP forward P/E is 45.3% lower than the 11.13x industry average. In terms of forward Price/Sales, WLK is currently trading at 1.06x, which is 13.5% lower than the 1.22x industry average. WLK’s trailing-12-month gross profit margin, EBITDA margin, and ROE are 31.7%, 32.6%, and 32.1%, respectively. The stock has gained 35.8% year-to-date to close yesterday’s trading session at $131.87.
WLK’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B grade for Value and Quality. Click here to see the additional ratings for WLK (Growth, Stability, and Momentum). The stock is ranked #17 in the Chemicals industry.
Alpha Metallurgical Resources, Inc. (AMR)
AMR is a mining company that extracts, processes, and sells met and thermal coal from deep and surface mines for sale to steel and coke producers, industrial customers, and electric utilities in Virginia and West Virginia. As of December 31, 2021, it operated twenty active mines and eight coal preparation and load-out facilities.
For the fiscal 2022 first quarter ended March 31, 2022, AMR’s total revenues increased 177.5% year-over-year to $1.07 billion. The company’s income from operations came in at $453.09 million, versus a $16.50 million loss in the year-ago period. Its net income came in at $400.89 million for the quarter, compared to a net loss of $32.93 million in the prior-year period. AMR’s EPS came in at $20.52, versus a $1.79 loss per share in the year-ago period. As of March 31, 2022, the company had $159.46 million in cash and cash equivalents.
Analysts expect the company’s EPS to hit $70.68 for its fiscal year 2022, ending December 31, 2022, representing a 362% rise from the prior-year period. It surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $3.69 billion for the same fiscal year indicates a 63.4% year-over-year improvement.
AMR’s 1.72x non-GAAP forward P/E is 84.6% lower than the 11.13x industry average. In terms of forward Price/Sales, AMR is currently trading at 0.69x, 43.8% lower than the 1.22x industry average. AMR’s trailing-12-month gross profit margin, EBITDA margin, and ROE are 35.9%, 34.2%, and 131%, respectively. The stock has gained 148.1% year-to-date to close yesterday’s trading session at $151.45.
AMR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B grade for Value, Sentiment, and Quality. Click here to see the additional ratings for AMR (Momentum and Stability). AMR is ranked #5 of 90 stocks in the B-rated Industrial - Services industry.
LYB shares were trading at $111.23 per share on Tuesday afternoon, up $3.82 (+3.56%). Year-to-date, LYB has gained 21.98%, versus a -14.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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