Chemicals: Is the worst behind us?
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.
