Detroit, Michigan – It was a first half to forget for anyone owning stock in most publicly held US materials makers.
The impact of the Covid-19 pandemic was felt by many industries as shutdowns caused demand to tumble, while creating financial uncertainty for the future. As a result, all 15 materials firms tracked by Plastics News saw their per-share prices drop between 1 Jan and the end of trading on 30 June.
Price declines ranged from only 3% for composites maker Rogers Corp. to more than 40% for fellow composites maker Hexcel Corp. Rogers benefited from having its first-quarter results exceed expectations of stock analysts. Hexcel in April ended merger plans with aerospace supplier Woodward Inc. because of uncertainties caused by Covid-19.
Eight of the 15 saw first-half per-share price declines of 20-29%. That group includes Dow Inc., Celanese Corp., Huntsman Corp., LyondellBasell Industries, Kraton Corp., Cabot Corp., Westlake Chemical Corp. and PolyOne Corp.
PolyOne on 1 July changed its name to Avient Corp. Investors hope the new name brings a higher stock price in the second half.
Eastman Chemical Co. and Chemours Co. posted modest per-share price losses of 8% and 9%, respectively, for the half. AdvanSix Inc. and Trinseo Corp. weren't as fortunate, with stock prices each dropping around 38%.
The large price losses seen by many public materials firms reflect their exposure to consumer and manufacturing markets, many of which have seen sizable demand drops. By comparison, the Dow Jones Industrial Average declined by about 9% in the first half, with the broader S&P 500 down about 3%.
Analysis of US GDP paints a dark picture for many of these firms, unless they're able to manage expectations. The first quarter produced a 5% drop in US GDP, but with the impacts of Covid-19 ramping up, that number in the second quarter could be down 40% or more, according to analysts.
Although the future is hard to discern even in a normal year — much less one with the apocalyptic feel of 2020 — the Investopedia.com website on 24 June provided a ray of light by placing LyondellBasell and Eastman on its list of Best Value Material Stocks, based on those firms' relatively low price-to-earnings (PE) ratios.
The Investorplace.com website also had Trinseo on a recent list of five plastics and rubber stocks that were "ready to bounce."
Trinseo management "remains confident," the site wrote, adding that the firm's stock "may take some patience, but if and when the cycle turns back in the company's favor, potentially enormous upside looms."