Monthly Thematic Piece

This is all going to end badly
July 20, 2020
Products Mentioned:
Ethylene, Polymers, Polyethylene
Companies Mentioned:
ASIX, Trinseo, Orion, Covestro, Olin, Kraton, Cabot, Huntsman, LyondellBasell, Dow, Westlake, Eastman, Grace, Celanese, HB Fuller, Axalta, DuPont, PPG, CCMP, DSM, Albemarle, IFF, Linde, Air Products, RPM, Entregris, Quaker, Sherwin Williams, Ecolab, BASF
Subjects Covered:
Economic Growth, Liability, COVID, Chemical Demand, Estimates, Valuation, Plastic Recycling

C-MACC Perspectives 24

 

This is all going to end badly

  • Since April 1st 2020, we have seen something quite unprecedented – almost all chemical companies have shown positive stock performance, while almost all have seen significant negative revisions for 2021 earnings, pushing up forward multiples for many companies at levels we have not seen previously.
  • While this is against a backdrop of a broader market which seems to shrug off every piece of negative news (despite us being “Far from out of the woods”) and follows a first quarter of significant stock declines, we see trouble ahead. 
  • A bubble of packaging-based demand coupled with outages in Asia have inflated prices over the past 8 weeks against a backdrop of ever worsening economic projections. Many chemical companies have done better in Q2 versus very low expectations and this has inflated hopes for the future, in our view. 
  • The conclusions discussed in this report suggest selling almost all stocks in the chemical space, especially on any 2Q20 earnings report/update driven strength.

See PDF below for all charts 

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