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US Specialty Chemical Volumes Expand in July: 4 Top Picks

The U.S. specialty chemical industry volumes expanded in July on sustained recovery in the U.S. economy, according to the latest report from the American Chemistry Council (“ACC”).

Positive July Readings

The Washington, DC-based chemical industry trade group said that U.S. specialty chemicals market volumes rose 1.9% in July on a monthly comparison basis. This follows a revised 4.6% increase a month ago and a 0.1% decline in May.

Of the 28 specialty chemical segments monitored by the ACC, 25 saw growth in July, an improvement from the expansion of 24 witnessed in June. Out of these 25 segments, 17 saw gains of 1% or more.

Per the ACC, the overall specialty chemicals volumes went down 9.1% on a year-over-year basis in July, improving from a 11.7% decline in June. Volumes stood at 101% of their average 2012 levels in July, which is equivalent to 3.12 million metric tons. Growth was witnessed in three specialty chemical segments on a year-over-year basis in July.

Specialty chemicals that include catalysts, surfactants, specialty polymers, coating additives and oilfield chemicals are used based on their performance and have a specific purpose. They have application in the manufacturing process of a vast range of products, including paints and coatings, cosmetics, petroleum products, inks and plastics.

Manufacturing Rebound Instils Optimism

The U.S Manufacturing sector continues to recover with activities expanding in July despite a resurgence in coronavirus cases.  According to the Institute for Supply Management ("ISM"), the U.S Purchasing Managers’ Index clocked 54.2% in July, rising from June’s reading of 52.6% and also the fastest pace since March 2019. A figure above 50% indicates expansion.

July saw a sharp rise in new orders with ISM's New Orders Index clocking 61.5, rising from 56.4 in June. Out of the 18 manufacturing industries, 13 reported growth in new orders in July. Per the ISM, demand and consumption continued to drive growth for the second straight month following three prior months of coronavirus-led disruptions.

The expansion in manufacturing activities suggests continued recovery in the U.S. economy. The economic recovery started in May after major parts of the United States reopened for business following coronavirus-led shutdowns. Lockdowns and travel restrictions brought economic activities to a near-standstill in March and April. However, the path of economic recovery could still be bumpy as the pandemic remains an overhang.

The manufacturing sector serves as a barometer to gauge the overall health of the U.S. economy and has a major influence on the chemical industry. The sector is a major driver for the chemical industry which touches around 96% of manufactured goods. Thus, the recovery in manufacturing augurs well for the U.S. specialty chemical industry.

4 Stocks Worth a Bet

The rebound in manufacturing activity and continued recovery in the U.S. economy are likely to act as a tailwind for the U.S. specialty chemical industry moving ahead. As such, it would be prudent to zero in on stocks in the space that have healthy prospects.

We highlight the following four stocks, with a solid Zacks rank, that are good options for investment right now.

Ashland Global Holdings Inc. ASH

Kentucky-based Ashland sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for the current year has been revised 13.8% upward over the last 60 days. The company also has an expected long-term earnings per share growth rate of 15%. Its shares are also up around 15% over the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hawkins, Inc. HWKN

This Minnesota-based company, carrying a Zacks Rank #2 (Buy), has expected earnings growth of 21.4% for the current fiscal year. The Zacks Consensus Estimate for the current year has been revised 7.7% upward over the last 60 days. The company has also seen its shares rise roughly 28% over the past three months.  

Valvoline Inc. VVV

Based in Kentucky, Valvoline carries a Zacks Rank #2. The consensus estimate for the current year has been revised 3% upward over the last 60 days. The company also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 19.2%. Its shares are also up around 14% over the past three months.

H.B. Fuller Company FUL

The Minnesota-based company has a Zacks Rank #2. The consensus estimate for the current year has been revised 10.2% upward over the last 60 days. The company also delivered an earnings surprise of 25.9% in the last reported quarter. It also has an expected long-term earnings per share growth rate of 7.8%. Moreover, its shares have shot up around 30% over the past three months.

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