Investing

Credit Suisse Sees Winners Among Defensive Specialty Chemicals Stocks

Chris Lange

Published: June 2, 2022 11:24 am

Specialty chemicals is not an industry that jumps off the page to many investors, as it generally acts as an adjunct to other more dynamic industries. However, the specialty chemicals industry does not need to be dynamic to make it a solid investment. Economically speaking, the inelastic nature of this industry implies a strong defensive stance that can stand up to market headwinds. Investors would be foolish not to at least consider any of these companies with the current state of the market.

Credit Suisse recently initiated coverage on a few major companies within the basic materials sector. Specifically, most of these calls come in the specialty chemicals industry. Credit Suisse’s John Roberts was somewhat mixed on where these stocks could go moving forward, but he did pick a couple of winners.

Some of the firms within the call are facing market headwinds, as the chemical products they produce may be subject to the economics of their derivative industries. One example brought up in the report is that as auto companies may be slowing production as a result of a global microchip shortage, the chemical products that go into these vehicles may be drawn down hand-in-hand with production.

On the other hand, these specialty chemical companies could stand to benefit as other industries open up production as supply chain issues alleviate over time. Also some companies within this industry could stand to benefit from a lack of oil products within the market, as the prices of oil and gas continue to rise.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Sherwin-Williams

Sherwin-Williams Co. (NYSE: SHW) develops, manufactures, distributes and sells paints, coatings and related products to professional, industrial, commercial and retail customers. The company has a footprint across five continents, and it is easily the biggest company in this space. Credit Suisse initiated coverage with an Underperform rating and a $245 price target, which implies downside of 11% from the closing price of $276.35.

Sherwin-Williams stock has a 52-week trading range of $233.32 to $354.15, and it traded at $267 a share early Thursday. The dividend yield is 0.9%. The stock is down about 24% year to date.

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PPG Industries

PPG Industries, Inc. (NYSE: PPG) manufactures and distributes paints, coatings and specialty materials worldwide. The company is headquartered in Pittsburgh and operates in more than 70 countries. By revenue, PPG was the second-largest coatings company in the world last year, second only to Sherwin-Williams. Credit Suisse started coverage with an Underperform rating and a $115 price target, implying downside of over 11% from the closing price of $130.03.

The stock was trading at $126, in a 52-week trading range of $111.32 to $182.97. The dividend yield is 1.9%. Shares are down nearly 27% year to date.

on Linde PLC (NYSE: LIN), Credit Suisse initiated coverage with an Outperform rating and a $380 price target. The implied upside from the closing price of $329.63 is over 15%. Linde operates as an industrial gas and engineering company in North and South America, Europe, the Middle East, Africa and the Asia Pacific. It offers atmospheric gases, including oxygen, nitrogen, argon and rare gases, as well as process gases, such as carbon dioxide, helium and more.

The 52-week trading range is $267.51 to $352.18, and shares traded at $323 Thursday morning. It has a dividend yield of 1.4%. Shares are down about 6% year to date.

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FMC

FMC Corp. (NYSE: FMC) is an agricultural sciences company that provides crop protection, plant health and professional pest and turf management products. It develops, markets and sells crop protection chemicals (including insecticides, herbicides and fungicides), biologicals, crop nutrition and more. Credit Suisse started coverage with an Underperform rating and a $109 price target, implying downside of over 13% from the closing price of $126.01.

The stock traded at $122 early Thursday, and it has a 52-week trading range of $87.27 to $140.99. The dividend yield is 1.7%, and the stock is up over 11% year to date.

Eastman Chemical

Credit Suisse initiated coverage of Eastman Chemical Co. (NYSE: EMN) with an Outperform rating and a $130 price target. The implied upside from the closing price of $109.63 is nearly 19%. The company operates as a specialty materials company in the United States and internationally. Its operating segments include Additives & Functional Products, Chemical Intermediates, and Fibers.

Eastman Chemical stock has a 52-week trading range of $98.24 to $129.98, and it traded at $110 a share Thursday morning. The dividend yield is 2.8%. The stock is down about 9% year to date.