The interconnectedness of the global economy fosters international trade in chemicals, creating new market opportunities. Innovations in chemical technology led to the development of new and improved products, expanding market opportunities, thus enabling the global chemical market to grow at a CAGR of 4.8% by 2031.
Additionally, the chemical industry is increasingly integrating AI technologies to optimize processes and accelerate discoveries. By leveraging machine learning and deep learning, AI supports chemists throughout stages, from research to production, enabling faster advancements in drug development and the creation of new materials.
Against this backdrop, let’s compare two established specialty chemicals stocks to analyze which chemical stock excels: NewMarket Corporation (NEU) and H.B. Fuller Company (FUL).
The Case for NewMarket Corporation Stock
With a $70.87 billion market cap, NewMarket Corporation (NEU) primarily manufactures and sells petroleum additives. The company offers lubricant additives for use in various vehicle and industrial applications, including engine oils, transmission fluids, off-road powertrains, and hydraulic systems.
NEU’s stock has gained 1.3% over the past year to close the last trading session at $542.34.
NEU’s trailing-12-month gross profit margin of 30.84% is 6.7% higher than the 28.90% industry average. Its trailing-12-month EBIT margin of 21.6% is 104.6% higher than the 10.56% industry average. Likewise, the company’s trailing-12-month net income margin of 15.57% is 214.7% higher than the 4.95% industry average.
During the third quarter, which ended September 30, 2024, NEU reported net sales of $724.95 million, up 3.7% year-over-year. Its segment operating profit increased 15.5% from the previous year’s quarter to $173.34 million. The company’s net income and EPS were $132.32 million and $13.79, up 18.9% year-over-year, respectively.
NEU’s POWR Ratings reflect robust prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NEU is ranked #4 out of 81 stocks in the B-rated Chemicals industry. It has a B grade for Quality, Growth, Quality, and Stability. To see NEU’s Momentum and Value ratings, click here.
The Case for H.B. Fuller Company Stock
Valued at $4.13 billion by market cap, H.B. Fuller Company (FUL) formulates, manufactures, and markets adhesives, sealants, coatings, polymers, tapes, encapsulants, additives, and other specialty chemical products. It operates through three segments: Hygiene; Health and Consumable Adhesives; Engineering Adhesives; and Construction Adhesives.
FUL’s stock has gained 1.7% over the past month to close the last trading session at $75.61 but plunged 6.2% over the past three months.
FUL’s trailing-12-month gross profit margin and EBIT margin of 30.54% and 11.98% are 5.7% and 13.4% higher than the industry average of 28.90% and 10.56%, respectively. However, its trailing-12-month CAPEX/Sales of 3.45% is 54.5% lower than the industry average of 7.58%.
For the fiscal third quarter that ended September 30, 2024, FUL’s net revenue increased 1.9% year-over-year to $917.93 million. The company’s gross profit grew 4.7% year-over-year to $275.73 million. Its net income and net income per share stood at $55.36 million and $0.98.
Analysts expect FUL’s revenue for the fourth quarter ending December 2024 to increase 2.7% year-over-year to $926.88 million. However, its EPS is expected to decline 5.5% year-over-year to $1.25 for the same quarter. It surpassed the consensus EPS estimates in three of the trailing four quarters.
FUL’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to Neutral in our proprietary rating system.
FUL has a C grade for Value, Momentum, Quality, and Growth. It is ranked #48 in the same industry.
Click here for the additional POWR Ratings for FUL (Stability and Sentiment).
NewMarket (NEU) vs. H.B. Fuller Company (FUL): Which Specialty Chemicals Stock Excels?
The chemical industry serves as a backbone for numerous industries, including automotive, construction, healthcare, and agriculture. As these sectors expand and evolve, the demand for chemicals surges in tandem.
Leading specialty chemicals companies NEU and FUL stand to capitalize on the optimistic industry outlook. However, NEU’s higher profitability and promising near-term outlook favor it as the better specialty chemicals stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Chemicals industry here.
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NEU shares were trading at $536.35 per share on Friday afternoon, down $5.99 (-1.10%). Year-to-date, NEU has declined -0.42%, versus a 29.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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