Chemical Stocks Jul 26 Earnings Preview: DD, ASH, AXTA, LNDC

A host of chemical companies are among a barrage of S&P 500 stocks gearing up to report their quarterly numbers this earnings-heavy week. The chemical industry falls under the broader Basic Materials sector. Based on the earnings scorecard as of Jul 22, 25% of the sector participants on the S&P 500 index have already unveiled their quarterly numbers. Earnings for these companies are up 1.2% from the same period last year on 4.8% lower revenues, per the latest Earnings Trends report.

The sector is one among the nine out of the 16 Zacks sectors that are expected to see negative earnings growth in the second quarter with an expected earnings decline of 13.9% on 7.7% lower sales.

The chemical industry is clawing its way back after being shaken by the global economic crisis. The industry’s recovery momentum is expected to continue in 2016, supported by strong momentum in the automotive market, a recovery in the construction space and significant shale-linked capital investment.

Chemical makers should also benefit from strategic measures including expansion into high-growth markets, cost management and productivity improvement actions as well as acquisitions. However, the industry faces certain roadblocks including a still weak agriculture market, soft demand in the energy space, a choppy Europe and a sluggish Chinese economy.

Let’s take a look at four chemical companies that are scheduled to report their quarterly results on Jul 26.

E. I. du Pont de Nemours and Company (NYSE:DD) , which will report second-quarter earnings results before the bell, has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.10. The company carries a favorable Zacks Rank #3 (Hold), but its 0.00% ESP makes surprise prediction difficult. DuPont surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 14.14%.

DuPont’s cost-saving and productivity measures should lend support to its earnings in the second quarter. The company is taking aggressive cost-cutting actions amid a still challenging operating backdrop. However, DuPont remains exposed to weak agricultural market conditions and currency headwinds which may continue to weigh on its top line in the second quarter. (Read more: DuPont Q2: Will Its Earnings Surprise Amid Challenges?)

Ashland Inc. (NYSE:ASH) will report fiscal third-quarter results after the close. It has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.07. The stock holds a Zacks Rank #4 (Sell), which coupled with a 0.00% ESP, makes surprise prediction difficult. The company outperformed the Zacks Consensus Estimate in the trailing four quarters with an average beat of 6.09%.

Axalta Coating Systems Ltd. (NYSE:AXTA) , which will report second-quarter numbers ahead of the bell, has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 34 cents. The stock holds a Zacks Rank #4, which coupled with a 0.00% ESP, makes surprise prediction difficult. Axalta missed estimates in two of the last four quarters.

Landec Corp. (NASDAQ:LNDC) will report fiscal fourth-quarter numbers after the bell. The company is expected to post a positive earnings surprise as it carries a favorable Zacks Rank #3 and Earnings ESP of +6.67%. The company missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 21.61%.

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