The gradual decline of the overall U.S. stock market since late April/early May is taking its toll on the share prices of firms with sizable plastics businesses.
The Dow Jones Industrial Average has fallen almost 6 percent from the peaks it attained in that period, but still remained up 3.1 percent so far in 2011, as of early trading June 14. Likewise, per-share prices for Dow Chemical Co., DuPont Co., Westlake Chemical Corp., Kraton Polymers U.S. LLC, Omnova Solutions Inc., Huntsman Corp. and LyondellBasell Industries each were down 10-20 percent from 2011 peaks as of June 14. Dow and DuPont are roughly flat for the year to date, while other stocks listed above, except Omnova, remain higher than their 2011 starting points. On June 7, stocks website OptionMonster.com said a large institutional trade in Dow shares the previous day could signal a rally.
Per-share prices at Ferro Corp. and Georgia Gulf Corp. have fared even worse than the group cited above, with Ferro down almost 30 percent and Georgia Gulf down 35 percent in the same comparison. Georgia Gulf remains slightly above its 2011 starting point, while Ferro now is slightly below.
PolyOne Corp., A. Schulman Inc. and Celanese Corp. have managed to buck the trend somewhat, falling only about 5-8 percent from their 2011 peaks. A June 1 entry on the website of Zacks Investment Research said Celanese “continues to trade like an all-star, recently hitting a new 52-week high on the heels of strong Q1 results that included a 16 percent earnings surprise.” The site gave Celanese its top stock ranking.
Spartech Corp. has faced the biggest challenge so far in 2011. The maker of sheet and compounds saw its share price open the year at $9.50, only to be buffeted by poor results that moved the price steadily downward to $6 on June 13 — a drop of almost 40 percent. But Spartech got a pat on the back in early April when SeekingAlpha.com listed it as one of 31 undervalued small-caps.
The site counted Spartech as one of 31 public firms with market values between $200 million and $1 billion, consensus earnings-per-share growth forecasted at more than 50 percent for 2011 and 2012 and price/earnings to growth ratios of less than 0.5.
In a recent interview, stock analyst Dmitry Silversteyn cited different reasons for the performance of PolyOne, Spartech, Schulman and Ferro. He covers those companies and other specialty chemicals firms for Longbow Research in Independence, Ohio.
PolyOne and Spartech tried to evolve their business models a few years back, but he said that while PolyOne has succeeded, Spartech has not. Schulman has benefited from a change in culture promoted by CEO Joseph Gingo, and moving from a cost-plus to a value-added business approach, he said. At Ferro, which generates about 20 percent of its sales from plastics, Silversteyn said the company's fortunes have been driven by a silver paste that it makes for the solar panel market.
“Things [at Ferro] were going fine,” he said. “But then solar panels hit a soft patch and sentiment changed.”