Report by Mill Street Research

Mill Street has developed an "Earnings Screen Score" ranking methodology that draws on selected inputs from their MAER (Monitor of Analysts’ Earnings Revisions) stock database to identify companies which have strong near-term fundamental momentum going into an earnings report. Mill Street’s research indicates that companies scoring highly in their ranking have a much higher chance of near-term improvements in analyst expectations than those that score poorly. Stocks most likely to produce positive near-term analyst estimate activity in the next couple of weeks include Lam Research, Regeneron Pharmaceuticals and Teradyne. Bottom ranked stocks include LyondellBasell, Eaton and Marathon Petroleum. Click here to access the full report.

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Report by Fermium Research

Frank Mitsch sees early signs of stabilisation in the chemicals sector, despite short interest sitting at 52-week (or longer) highs and persistent investor concerns around potential dividend cuts. While he remains cautious on Tronox and Huntsman’s payouts, he considers dividends from Dow and LyondellBasell to be safe. Roughly 60% of 1Q results landed within 4% of his expectations, with Olin, Corteva, FMC and Celanese leading on beats vs. the Street. Westlake was the notable miss, due to underperformance in its PEM segment, partly from unplanned downtime. After over two years of sector underperformance, exacerbated by the overreaction to Liberation Day, Frank believes the worst may be behind us; hence his recent upgrades (to Buy) on DOW, LYB and PPG. He has also been heartened by how the credit markets have been open to companies such as CE and OLN.

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Report by Alembic Global Advisors

Market confusion surrounds its true earnings power - WLK has been very active on the M&A front recently and now generates around two-thirds of its earnings from chlorovinyls. Since hitting its Mar 2020 lows, its share price, while keeping pace with ethylene/polyethylene-biased name LyondellBasell, has significantly underperformed the company’s main chlorovinyl peer, Olin. Hassan Ahmed believes this underperformance is unwarranted and makes the case that WLK has been acquiring businesses that have a far more stable earnings profile, which should reduce the company’s overall cyclicality and result in a multiple re-rating.

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Report by Alembic Global Advisors

This decade could see US ethylene margins even stronger than last decade's lofty margins - in addition to discussing how the crude oil-to-natural gas price ratio remains squarely in the US chemical industry’s favour, Hassan Ahmed contends that higher margins are sustainable, particularly keeping in mind that 79% of all ethylene capacity expected to come online between 2021-2026 will be based in the cost-disadvantaged regions of Asia and Europe. His analysis suggests that as much as 21% of this incremental capacity is at risk of being cancelled or delayed, which bodes well for Dow Inc (TP $75), LyondellBasell (TP $120) and Westlake (TP $140).