By: Frank Esposito
May 15, 2014
Executives at Axiall Corp., an Atlanta-based maker of PVC resin, compounds and construction products, had to feel pretty good in mid-April about the 12.5 percent rise in their firm’s per-share stock price since July 1.
Maybe they splurged a little at lunch. Or filled their cars up with premium gas instead of standard unleaded.
But while a 12.5 percent hike in valuation is nothing to be ashamed of, it’s the lowest increase registered in that span by 16 publicly held materials firms tracked by Plastics News.
Based on closing prices on April 16, Ferro Corp. had paced that group with a per-share price increase of 88 percent. The firm, a maker of plastics and specialty chemicals in Mayfield Heights, Ohio, had a per-share price right around $7 per share on July 1, but recently that number was near $13.20.
Dow Chemical Co., PolyOne Corp. and Huntsman Corp. each saw their prices soar almost 50 percent. In that stretch of almost 10 months. LyondellBasell Industries’ per-share price jumped almost 40 percent, while prices at Kraton Performance Polymers, Cytec Industries and Westlake Chemical Co. each climbed 30 to 32 percent.
Westlake, a maker of polyethylene, PVC and related feedstocks in Houston, deserves special mention for initiating a rare 2-for-1 stock split. Pre-split, the firm’s $65 price on April 16 would have been an astronomical $130.
Per-share prices at Eastman Chemical Co., DuPont Co., Hexcel Corp., Rogers Corp., A. Schulman Inc. and Celanese Corp. each bounced up 23 to 28 percent. The only PN-tracked firm outside of Axiall that saw a gain of less than 20 percent for the period was Omnova Solutions. And executives at that Fairlawn, Ohio-based maker of maker of plastic materials, films, laminates and chemical products probably drank a toast to their 16 percent price gain anyway.
What’s allowed these outsized gains during a span when the Dow Jones Industrial average has been up about 12 percent and the S&P 500 up about 20 percent? Many of the firms listed above have benefited from improving economies in the U.S. and Europe, as well as from low-priced feedstocks derived from new discoveries of natural gas throughout North America.
Online commentators also have found plenty to like in these stocks. In February, financial website Seeking Alpha advised readers to “buy Hexcel before it takes off,” citing increased uses of the firm’s carbon fiber-reinforced polymers vs. aluminum in aerospace applications.
That same site followed in March by describing Dow and Celanese as “value stocks [that] have the right chemistry for your portfolio.” In the previous 12 months, both Dow and Celanese had low price-to-earnings ratios, dividend payouts and triple digit earnings-per-share growth, according to the site,
April also was a big month for online praise of this stock group. Zacks Equity Research said that Westlake’s “earnings streak will continue,” adding that the firm “has a nice short-term history of crushing expectations.” Not to be outdone, Seeking Alpha also in April heaped praise on Omnova and Schulman. Omnova “combines a compelling undervaluation with strong earnings growth,” according to the site, and could see its stock price climb by as much as 30 percent by 2016,
Schulman was described by the site as “an underrated, diversified business with an appetite for M&A.” It added that Schulman’s shares “are a compelling value, and trade below fair value and its historical [price-to-earnings] average.”
(The timing of the comments make you wonder if the Seeking Alpha guys made a day out of visiting Fairlawn, the Akron suburb where the headquarters of Omnova and Schulman are located about three miles apart from each other.)
Growth has slowed a bit since the start of 2014 — and, as the saying goes, past performance is not indicative of future results — but overall economic growth should continue at least through 2014, with low-priced feedstocks available well beyond that spell. Time will tell if smiles will remain on the faces of those owning stock in plastics materials firms.
Esposito is a Plastics News senior reporter.