While overall chemical demand held steady in 2023, new government policies and incentives are expected to drive the need for chemicals and materials to support the energy transition to surge in 2024 and beyond.
Hence, investors could invest in quality chemical stocks Brenntag SE (BNTGY), AGC Inc. (ASGLY), and Toray Industries, Inc. (TRYIY), which are currently on an uptrend.
The United States is one of the largest national producers of chemical products globally. According to a report by MarketsandMarkets, the top seven chemical subindustries are projected to grow from $2.20 trillion in 2023 to $2.40 trillion by 2024, with a CAGR of 8%.
These segments are expected to present new opportunities worth $165 billion in 2024, including new technologies, sustainable solutions, new materials, and energy transition initiatives.
Further, the introduction of new government policies and incentives aimed at promoting investment in energy transition has spurred heightened manufacturing activity, particularly in sectors reliant on chemicals and materials. The chemical sector is also seeing a rise in AI adoption, with companies using Industry 4.0 tools like IoT, digital twins, and robotics for automation.
Additionally, the specialty chemicals market is experiencing growth driven by increasing demand from the electronics and pharmaceutical industries. The introduction of nanomaterials in specialty chemicals is anticipated to bring about innovative functionalities, offering significant growth prospects. The market is estimated to total $762.08 billion by 2030, expanding at a CAGR of 4.4%.
With these promising trends in mind, let's delve into the fundamentals of the top three Chemicals stocks, starting with the third-ranked option.
Stock #3: Brenntag SE (BNTGY)
Headquartered in Essen, Germany, BNTGY procures and supplies industrial and specialty chemicals via Brenntag Essentials and Brenntag Specialties segments. It offers just-in-time delivery, blending, repackaging, inventory management, and drum return handling services.
On March 5, 2024, BNTGY closed its inaugural share buy-back program, acquiring shares of up to €250 million ($270.59 million). This completion marks the end of the program, which began in March 2023 with the first tranche totaling €500 million ($541.18 million) and was successfully concluded by acquiring additional shares, achieving the program's total volume.
On February 6, 2024, BNTGY revealed its latest strategic move, the acquisition of Chimica D’Agostino’s chemical logistics site nestled in Bari, Italy's bustling industrial hub. This strategic site, located in Puglia and boasting easy access to the Adriatic highway and nearby harbors, promises to bolster BNTGY's foothold in Southern Italy while optimizing its regional site network.
BNTGY planned to propose a dividend payment of €2.10 per share at the Annual General Meeting on May 23, 2024, up from €2 in 2022. If approved, this will mark the thirteenth consecutive dividend increase since the company's IPO in 2010.
The company pays an annual dividend of $0.44, which yields 1.80% on the current market price. Its dividend payouts have grown at a CAGR of 15.8% over the past three years.
During the fiscal year 2023, BNTGY generated net sales of €16.82 billion ($18.20 billion). Its operating gross profit and EBITA stood at €4.04 billion ($4.37 billion) and €1.27 billion ($1.37 billion). The company’s free cash flow rose 70.3% from the prior year to €1.71 billion ($1.85 billion).
BNTGY anticipates its operating EBITA for the fiscal year 2024 to range between €1.23 billion ($1.33 billion) and €1.43 billion ($1.55 billion). Analysts expect BNTGY’s revenue to increase 3.2% year-over-year to $19 billion for the fiscal year ending December 2024.
The stock has gained 15.7% over the past year to close the last trading session at $17.06. It is trading above its 200-day moving average of $16.32, indicating an uptrend.
BNTGY’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BNTGY has an A grade for Stability and Momentum and a B for Value. It is ranked #8 out of 82 stocks within the B-rated Chemicals industry.
In addition to the POWR Ratings I’ve highlighted, you can see BNTGY’s Growth, Sentiment, and Quality ratings here.
Stock #2: AGC Inc. (ASGLY)
ASGLY is a Tokyo-based global company that manufactures and sells a wide range of products, including glass, automotive components, electronics materials, chemicals, and ceramics.
On February 28, ASGLY announced that it had completed the transfer of its Russian operations, including AGC Bor Glassworks JSC and AGC Flat Glass Klin LLC, fully withdrawing from the Russian market.
ASGLY’s net sales for its fiscal year ended December 31, 2023, came in at ¥2.02 trillion ($13.34 billion). The company reported a profit before tax of ¥122.78 billion ($810.66 million), up 108.8% from the prior year. Profit for the year attributable to owners of the parent was ¥65.80 billion ($434.45 million), compared to a loss of 3.15 billion ($20.80 million) in the previous year.
The $3.63 billion consensus revenue estimate for fiscal year 2024 represents a 205.1% increase over the prior year.
The stock has gained 3.7% over the past month to close the last trading session at $7.22. It is trading above its 50-day and 200-day moving averages of $7.17 and $7.05, respectively.
It’s no surprise that ASGLY has an overall A rating, which equates to a Strong Buy in our POWR Ratings system.
The stock has an A grade for Stability and a B for Growth, Momentum, and Quality. It is ranked #5 in the same industry.
Click here to see ASGLY’s additional Value and Sentiment grades.
Stock #1: Toray Industries, Inc. (TRYIY)
Headquartered in Tokyo, Japan, TRYIY, with its subsidiaries, manufactures, processes, and sells fibers and textiles, performance chemicals, carbon fiber composite materials, environment and engineering products, and life science products.
On March 28, TRYIY announced that it would initiate a sewage reuse system demonstration utilizing its water treatment membranes in Chennai, India, in response to the nation's escalating water demand amid rapid urbanization and prevalent drought conditions.
With an estimated water supply shortfall of 30% to 40% and limited sewage treatment capacity, TRYIY aims to address water scarcity and pollution challenges.
On March 21, TRYIY unveiled a highly durable reverse osmosis (RO) membrane designed to provide long-term high-quality water provision. The versatile applications of RO membranes encompass desalination, wastewater reuse, and drinking water production, addressing the need for sustainable water sources.
The company plans to mass-produce and launch the membrane in the expanding Chinese market by the first half of 2024, with global market expansion, including Japan, on the horizon.
It pays an annual dividend of $0.25, which yields 2.51% on the current market price, higher than its four-year average dividend yield of 2.26%.
During the nine months ended December 31, 2023, TRYIY reported revenues of ¥1.83 trillion ($12.08 billion) and operating income of ¥71.37 billion ($471.22 million). Profit attributable to owners of the parent reached ¥45.66 billion ($301.47 million), with its EPS standing at ¥28.46.
Furthermore, total assets amounted to ¥3.39 trillion ($22.38 billion) as of December 31, 2023, compared to ¥3.19 trillion ($21.06 billion) as of March 31, 2023.
TRYIY’s revenue is expected to increase 268.4% year-over-year to $16.79 billion in the fiscal year ending March 2024.
Over the past month, the stock has gained 4.6% to close the last trading session at $9.63. It is currently trading above its 50-day moving average of $9.49.
TRYIY’s POWR Ratings reflect this robust outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
TRYIY has an A grade for Stability and a B for Growth, Value, and Momentum. Within the same industry, it is ranked #3.
To see the additional ratings of TRYIY for Sentiment and Quality, click here.
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.
BNTGY shares were trading at $16.81 per share on Thursday afternoon, down $0.25 (-1.49%). Year-to-date, BNTGY has declined -8.22%, versus a 10.40% 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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