The U.S. chemical industry has gotten off to a buoyant start in the third quarter with July seeing a rise in chemical production on gains across all regions, according to the latest monthly report from the American Chemistry Council (ACC).
Encouraging July Readings
The chemical industry trade group said that the U.S. Chemical Production Regional Index (CPRI) went up 1.1% in July on a monthly comparison basis. The U.S. CPRI, which is measured using a three-month moving average, was created to track chemical production in seven regions nationwide.
The July reading showed a rise in chemical output across the board. Production across Gulf Coast, Midwest and Northeast rose 1.1%, while both Mid-Atlantic and West Coast saw a 1% increase. Output went up 1.3% in Ohio Valley while Southeast saw a 1.2% gain.
By segments, chemical production was mixed in July. Gains across consumer products, pharmaceuticals, other specialty chemicals, pesticides, fertilizers, coatings, plastic resins, adhesives, chlor-alkali, other inorganic chemicals, industrial gases and organic chemicals were neutralized by lower production of synthetic rubber and manufactured fibers.
Overall chemical production also went up 2.3% year over year in July with all regions scoring gains.
U.S. Chemical Industry Set to Ride High
The U.S. chemical industry is on course for solid growth this year and the next. The outlook for the American chemical industry paints an encouraging picture.
The ACC envisions accelerated growth for the domestic chemical industry on the back of an improving global economy and a surge in shale-linked capital investment. The trade group, in its year-end 2016 outlook, said that it expects national chemical production to rise 3.6% in 2017, further accelerating to 4.8% growth in 2018.
The shale gas bounty is expected to drive investment on plants and equipment in the U.S. Chemical makers are ratcheting up investment on shale gas-linked projects to take advantage of ample and affordable natural gas supplies.
Per an ACC report, 310 new chemical projects have been already announced by chemical makers worth around $185 billion that are under construction or planned. Such investments are expected to boost capacity and export over the next several years. The ACC also expects domestic chemical industry capital spending to increase at a 7% annual rate through 2021.
Favorable Industry Rank & Strong Price Performance
The Zacks Industry Rank of 34 carried by the Zacks Chemicals Diversified industry is a testimony to the fact that the chemical industry is back in favor. The favorable rank places the industry in the top 13% of the 250+ groups enlisted.
The Zacks Chemicals Diversified industry has also outperformed the broader market over the past year. The industry has gained around 16.7% over this period, higher than S&P 500’s corresponding return of 12.4%.
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4 Chemical Stocks to Bet on Right Now
The U.S. chemical industry’s upturn is expected to continue in the second half of 2017 on continued momentum across major end-markets such as automotive and construction. Amid such a backdrop, it would be a prudent idea to invest in chemical stocks with compelling growth prospects if you are looking to reap solid returns from your portfolio.
We highlight the following stocks with Zacks Rank #1 (Strong Buy) or 2 (Buy) that are good options for investment right now. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Chemours Company CC
Delaware-based Chemours carries a Zacks Rank #1 and has long-term expected earnings per share (EPS) growth rate of 15.5%. The company also has expected earnings growth of 255.4% for the current year. Moreover, it delivered average positive earnings surprise of 12.1% over the trailing four quarters. The stock has also gained a staggering 249% over the last year.
Kronos Worldwide, Inc. KRO
Texas-based Kronos Worldwide is another attractive choice with a Zacks Rank #1. The company delivered average positive earnings surprise of 76.1% over the trailing four quarters. It has expected earnings growth of a whopping 354.8% for the current year. Moreover, the company has long-term expected EPS growth rate of 5%. The stock has also gained roughly 137% over the last year.
Koppers Holdings Inc. KOP
Our next pick in the space is Pittsburgh-based Koppers, armed with a Zacks Rank #2. The company has long-term EPS growth rate of 18%. It also delivered positive earnings surprise in each of the trailing four quarters with an average beat of 56.6%. Moreover, the company has expected earnings growth of 13.5% for the current year. The stock has also gained around 19% over the last year.
Ferro Corporation FOE
Headquartered in Mayfield Heights, OH, Ferro sports a Zacks Rank #2. The company has an expected earnings growth of 16.5% for the current year. It delivered average positive earnings surprise of 16.2% over the trailing four quarters. The stock has also returned roughly 43% over the last year.
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