In this article, we will discuss the 12 Best Chemical Stocks to Buy According to Analysts.
PwC believes that Chemicals M&A deal value and volume demonstrated signs of a rebound in H2 2024. This was due to numerous factors, such as central banks cutting rates, moderation of inflation and the broader destocking trend starting to subside. The firm expects chemical deal activity to further rebound in H1 2025 due to the easing of economic and political uncertainties across major countries.
Notably, a renewed emphasis on domestic industrial policy and global supply chain realignment, together with higher private equity exits, are expected to result in more assets in the market, fueling the deal activity. David Yankovitz, the US Chemicals Market Leader at Deloitte, believes that the 2025 outlook for the broader chemical sector demonstrates a transition to a high-tech, low-carbon future.
Growth Drivers for Chemicals Industry
The American Chemistry Council (ACC) anticipates a 1.9% rebound in chemical volumes in 2025 after 2 consecutive years of declines as the US economy continues to undergo a soft landing and the housing market witnesses improvement in H2 of the year. Martha Moore, chief economist at the ACC, expects that the US Fed rate cuts will stimulate demand for durable goods and investment. Moore also expects an improvement in manufacturing and industrial production globally in 2025, which can help US exports. That being said, the trade policy is uncertain with the threat of tariffs by the Trump administration.
Amidst the challenges, the economist expects a recovery in demand for the US chemicals, although a modest one, in 2025, which will be weighted towards H2 2025 as the lag effects of the rate cuts take hold.
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Transformative Trends Affecting the Chemicals Sector
David Yankovitz expects an improvement in operational excellence via cost-reduction programs and asset rationalization. Amidst the fluctuating market conditions, several chemical companies continue to emphasize cost-effectiveness. With the help of strategic cost-reduction programs and asset rationalization, companies have been striving to improve operational effectiveness. The chemical companies tend to navigate uneven growth throughout several end markets. With a strong focus on high-growth sectors like semiconductors and clean energy, companies have been positioning themselves to capitalize on such opportunities.
Apart from these trends, Yankovitz believes that innovation remains critical for advancing the chemical industry. Organizations continue to invest in enhancing their product offerings, optimizing manufacturing processes, and collaborating throughout ecosystems to fuel sustainability and performance. Such a comprehensive approach to innovation might help businesses cater to the changing market demands. Notably, it also helps prepare for leadership in a low-carbon, high-tech future.
Amidst these factors, let us now have a look at the 12 Best Chemical Stocks to Buy According to Analysts
A close up of a laboratory beaker filled with colorful chemicals, signifying the company’s specialty chemicals.
Our Methodology
To list the 12 Best Chemical Stocks to Buy According to Analysts, we used a screener and online rankings to shortlist the chemical stocks. Next, we chose the ones in which analysts saw upside potential. Finally, the stocks were ranked in ascending order of their average upside potential, as of 29th January. We also mentioned hedge fund sentiments around each stock, as of Q3 2024.
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12 Best Chemical Stocks to Buy According to Analysts
12) LSB Industries, Inc. (NYSE:LXU)
Average Upside Potential: 15.2%
Number of Hedge Fund Holders: 18
LSB Industries, Inc. (NYSE:LXU) is engaged in the manufacturing, marketing, and selling of chemical products. Piper Sandler analyst Charles Neivert upped the company’s price target to $12.25 from $11, keeping an “Overweight” rating. As per the analyst, the trends that have been identified demonstrate advancing tailwinds, which might strengthen grain prices and aid increased nutrient prices. In Piper’s view, such tailwinds are expected to be sustainable. LSB Industries, Inc. (NYSE:LXU) placed a strong emphasis on clean ammonia growth initiatives. Such projects remain in line with the global trend focused towards more sustainable and environmentally friendly industrial processes.
The strong performance of the nitrogen market acted as a significant tailwind for LSB Industries, Inc. (NYSE:LXU). Analysts expect that this favorable market condition might continue, offering a healthy foundation for its operations and financial results. The strong nitrogen market not only helps current operations but also lends support to LSB Industries, Inc. (NYSE:LXU)’s expansion plans in the clean ammonia sector.
Notably, the broader clean ammonia market offers a strong growth opportunity for the company. With the efforts to reduce carbon emissions intensifying, clean ammonia demand is anticipated to increase throughout several sectors, such as agriculture, transportation, and energy storage. Therefore, LSB Industries, Inc. (NYSE:LXU)’s early investments in this area might place it as a market leader, resulting in long-term contracts.
11) Methanex Corporation (NASDAQ:MEOH)
Average Upside Potential: 17.2%
Number of Hedge Fund Holders: 17
Methanex Corporation (NASDAQ:MEOH) produces and supplies methanol in China, Europe, the US, South America, South Korea, Canada, and Asia. BMO Capital Markets updated its outlook on the company’s stock, with the analyst increasing the price target from $60.00 to $65.00, offering an “Outperform” rating. The BMO Capital analyst noted numerous factors that led to the optimistic assessment. The global methanol market remains tight, which aids Methanex Corporation (NASDAQ:MEOH)’s business.
Furthermore, the recent acquisition of OCI’s methanol and ammonia assets is anticipated to be accretive to the company’s financials. To give a brief context, Methanex Corporation (NASDAQ:MEOH) announced that it has entered into a definitive agreement to acquire OCI Global’s international methanol business for $2.05 billion. The transaction consists of OCI’s interest in 2 world-scale methanol facilities in Beaumont, Texas, one of which produces ammonia. Methanex Corporation (NASDAQ:MEOH) continues to operate effectively, despite facing deteriorated gas conditions in New Zealand.
Elsewhere, Scotiabank upped the company’s price target to $66 from $60, keeping an “Outperform” rating. While Q4 witnessed soft sales, New Zealand gas sales partially offset this, says the analyst. As a leading player in the methanol market, Methanex Corporation (NASDAQ:MEOH) remains well-placed to capitalize on the favorable price trends. Its global production network enables it to leverage regional price differences and optimize its sales strategy.