Industrial Chemicals: 3 Stocks Poised for Growth in the New Year

Industry Overview - The chemicals industry experienced significant growth prior to and during the COVID-19 pandemic, but has since faced a downturn, with growth rates dropping to under 2% per year since late 2022, compared to a 24% annual increase in global indexes during the same period [1][2] Factors Affecting Performance - Persistent inflation, high energy prices, regulatory changes, and an imbalance between production capacity and demand have contributed to the industry's decline [2] - Industries that heavily utilize chemical products, such as consumer packaged goods and automotive, have seen slowed or reversed growth, negatively impacting demand for chemicals [2] Company-Specific Insights Quaker Houghton - Quaker Houghton has faced challenges due to soft-end market conditions, resulting in a 6% year-over-year decline in net sales to $462 million for the latest quarter [5][6] - Despite these challenges, new business initiatives and strong pricing have helped mitigate negative impacts [3][5] - The company is expected to potentially overcome pandemic-related setbacks in 2025 [6] Balchem Corporation - Balchem has performed better than Quaker, with a one-year return of 16.3% and a more than 4% increase in net sales year-over-year, driven by its Human Nutrition and Health and Special Products segments [7][8] - The Human Nutrition and Health segment may see further growth if political changes favor the industry [8] - Balchem's free cash flow of over $42 million allowed it to reduce debt and increase dividends by 10%, maintaining a manageable payout ratio of 23.4% [9] H.B. Fuller - H.B. Fuller has diversified its operations through acquisitions, leading to increased net debt of about $2 billion, but maintains a solid foundation with $3.5 billion in sales for 2023 [11] - The company has seen a decline of over 15% in share price over the past year, making it a potential value candidate with a P/S ratio of about 1.1 [12] - Analysts rate H.B. Fuller as a Moderate Buy, with a consensus price target of $92.75, indicating a potential upside of about 34% from current levels [12]