SYS-CON MEDIA Authors: Xenia von Wedel, Peter Silva, Glenn Rossman, Ava Smith, Elizabeth White

News Feed Item

Zacks Industry Outlook Highlights: Dow Chemical, PPG Industries, Methanex, DuPont and Celanese

CHICAGO, April 14, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Chemicals, including Dow Chemical Company (NYSE:DOW-Free Report), PPG Industries Inc. (NYSE:PPG-Free Report), Methanex Corp. (Nasdaq:MEOH-Free Report), DuPont  (NYSE:DD-Free Report) and Celanese Corp. (NYSE:CE-Free Report).

Zacks Investment Research, Inc., www.zacks.com.

Industry: Chemicals

Link: http://www.zacks.com/commentary/32131/chemical-industry-stock-outlook---april-2014

The chemical industry is poised for a recovery this year and the next. The American Chemistry Council (ACC), an industry trade group, foresees national chemical output (excluding pharma) to rise 2.5% in 2014 (up from a 1.6% increase in 2013) and further improve to a 3.5% gain next year. Growth will be backed by strong agricultural market fundamentals, healthy demand from light vehicles market and a recovery in the housing market manifested by increase in building permits and a steady pick-up in home prices.

U.S. chemical exports are expected to rise 6.6% this year and 7.6% in 2015, leading to continued generation of trade surplus. Trade in chemicals is expected to rise with a recovery in global manufacturing activities.

On the global front, ACC sees production to move up 3.8% in 2014 and 4.1% in 2015 with healthy gains expected across North America and emerging markets.

The ACC expects strong capital spending in the coming years, stemming from new investments in petrochemicals and derivatives. It envisions U.S. capital spending to reach $61.2 billion by 2018.

The shale gas boom is expected to drive investment on plants and equipment in the U.S. The ACC expects U.S. chemical revenues to surpass $1 trillion and the industry to rake in record trade surpluses by 2018, partly boosted by significant share gas-driven chemical capacity.

According to the European Chemical Industry Council (CEFIC), which represents the European chemicals industry, chemical output was flat year over year in Europe in 2013, modestly better than an expected 0.5% decline. Weak demand across automotive and construction markets remain as overhang, contributing to fragile recovery. Nevertheless, CEFIC expects recovery in the European chemicals industry to continue at a sluggish pace and sees a 1% rise in output in 2014, aided by an uptick in exports.

OPPORTUNITIES

Shale Boom Driving Chemical Investment

According to the ACC, emerging market growth and favorable oil-to-gas price ratios resulting from abundant shale gas production are driving U.S. chemical exports. A string of factors are driving growth in the export markets, including favorable energy costs stemming from the abundance of shale gas and healthy demand from the emerging markets.

Affordable natural gas and ethane (derived from shale gas) offer U.S. producers a compelling cost advantage over their global counterparts who use a more expensive, oil-based feedstock. New methods of extraction such as horizontal drilling and hydraulic fracturing are boosting shale production, bringing down prices of ethane in the process.

Leveraging the abundant natural gas supply and cost advantage, chemical companies are investing billions of dollars for setting up facilities (crackers) that produce ethylene from ethane. The U.S. has emerged as an attractive investment location and chemical makers are aggressively expanding capacity in the country.

A recent ACC report indicated that potential domestic chemical investment related to share gas has reached as high as $100 billion, more than 50% of which are from firms outside of the U.S. Already 148 projects -- backed by Federal government support -- have been announced by chemical makers to take advantage of ample natural gas supplies.

These projects may lead to $81 billion in new chemical industry output annually and 637,000 permanent new jobs by 2023. Such investments are expected to boost capacity and export over the next several years.

Agriculture: A Compelling Opportunity

Major chemical makers are increasingly shifting focus on businesses that cater to agriculture and nutrition markets in an effort to cut their exposure on other businesses that are grappling with weak demand and input costs pressure. In particular, agriculture is emerging as a lucrative market as evident from recent trends.

A healthy start in the North American growing season, strong planting activity by growers across North and Latin America, solid order book and healthy supply of seeds and crop protection products represent driving factors.

Strategic Actions

Mergers and acquisitions offer chemical companies another means to shore up growth in a still challenging economic scenario. These companies remain focused on exploring growth opportunities in the fast-growing emerging markets, particularly in the lucrative regions of Asia-Pacific and Latin America.

Moreover, cost-cutting measures implemented by chemical companies including plant closures and headcount reduction should yield industry-wide margin improvements. Cash flows derived through these actions can be used for growth.

Recovery in Chinese Demand

China, a major market, is expected to see a recovery in 2014. Government stimulus actions coupled with efforts to stem inflation appear to bear fruit and exports to the U.S. and other key markets are regaining momentum. An improved demand outlook for China augurs well for the chemical industry this year.

Stocks We Like

Chemical stocks that we like include The Dow Chemical Company (NYSE:DOW-Free Report), PPG Industries Inc. (NYSE:PPG-Free Report), Methanex Corp. (Nasdaq:MEOH-Free Report), DuPont  (NYSE:DD-Free Report) and Celanese Corp. (NYSE:CE-Free Report). Dow and DuPont, in particular, are witnessing strong momentum in agriculture, driven by higher demand for crop protection products.

WEAKNESSES

Macro Headwinds

Persistent weakness in Europe and its impact on global growth remain sources of near-term uncertainty. Western Europe continues to pose challenges on chemical stocks due to weak demand. Given the industry's sensitivity to the global economy, any negative current in the macro economy would be reflected in the prospects of the chemical companies.

In addition, weakness still persists in commercial construction, which is among the key end-use markets. Demand from some of the major manufacturing industries remains below the historic levels.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!  Click here for your free subscription to Profit from the Pros.

Get the full Report on DOW- FREE

Get the full Report on PPG- FREE

Get the full Report on MEOH- FREE

Get the full Report on DD- FREE

Get the full Report on CE- FREE

Follow us on Twitter:  http://twitter.com/zacksresearch

Join us on Facebook:  http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

[email protected]

http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO

SOURCE Zacks Investment Research, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
High-performing enterprise Software Quality Assurance (SQA) teams validate systems that are ready for use - getting most actively involved as components integrate and form complete systems. These teams catch and report on defects, making sure the customer gets the best software possible. SQA teams have leveraged automation and virtualization to execute more thorough testing in less time - bringing Dev and Ops together, ensuring production readiness. Does the emergence of DevOps mean the end of E...
"Matrix is an ambitious open standard and implementation that's set up to break down the fragmentation problems that exist in IP messaging and VoIP communication," explained John Woolf, Technical Evangelist at Matrix, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
We are reaching the end of the beginning with WebRTC, and real systems using this technology have begun to appear. One challenge that faces every WebRTC deployment (in some form or another) is identity management. For example, if you have an existing service – possibly built on a variety of different PaaS/SaaS offerings – and you want to add real-time communications you are faced with a challenge relating to user management, authentication, authorization, and validation. Service providers will w...
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective ...
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges. In his session at @ThingsExpo, Jeff Kaplan, Managing Director of THINKstrateg...
Cultural, regulatory, environmental, political and economic (CREPE) conditions over the past decade are creating cross-industry solution spaces that require processes and technologies from both the Internet of Things (IoT), and Data Management and Analytics (DMA). These solution spaces are evolving into Sensor Analytics Ecosystems (SAE) that represent significant new opportunities for organizations of all types. Public Utilities throughout the world, providing electricity, natural gas and water,...
DevOps is all about agility. However, you don't want to be on a high-speed bus to nowhere. The right DevOps approach controls velocity with a tight feedback loop that not only consists of operational data but also incorporates business context. With a business context in the decision making, the right business priorities are incorporated, which results in a higher value creation. In his session at DevOps Summit, Todd Rader, Solutions Architect at AppDynamics, discussed key monitoring techniques...
Want to enable self-service provisioning of application environments in minutes that mirror production? Can you automatically provide rich data with code-level detail back to the developers when issues occur in production? In his session at DevOps Summit, David Tesar, Microsoft Technical Evangelist on Microsoft Azure and DevOps, will discuss how to accomplish this and more utilizing technologies such as Microsoft Azure, Visual Studio online, and Application Insights in this demo-heavy session.
When an enterprise builds a hybrid IaaS cloud connecting its data center to one or more public clouds, security is often a major topic along with the other challenges involved. Security is closely intertwined with the networking choices made for the hybrid cloud. Traditional networking approaches for building a hybrid cloud try to kludge together the enterprise infrastructure with the public cloud. Consequently this approach requires risky, deep "surgery" including changes to firewalls, subnets...
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
One of the biggest challenges when developing connected devices is identifying user value and delivering it through successful user experiences. In his session at Internet of @ThingsExpo, Mike Kuniavsky, Principal Scientist, Innovation Services at PARC, described an IoT-specific approach to user experience design that combines approaches from interaction design, industrial design and service design to create experiences that go beyond simple connected gadgets to create lasting, multi-device exp...
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at @ThingsExpo, Robin Raymond, Chief Architect...
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using ...
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series dat...