Chemicals: Is the worst behind us?
Materials
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.
Edition: 212
- 30 May, 2025
Materials
Having recently upgraded FMC to Buy following news of Pierre Brondeau's return as CEO, Fermium is heartened by the tangible progress being made on the company's cost reductions. Furthermore, while 3Q guidance was below current consensus (as they expected), the key point is the company’s assertion that 4Q will be materially higher than current estimates, suggesting that the wicked destock since 2Q23 is running its course. Their thesis appears to be playing out. With 2025 set up to be a “normal year”, they remain of the opinion that FMC’s share price will return to more “normal” levels.
Edition: 192
- 09 August, 2024