Zacks Industry Outlook Axalta Coating, Ingevity and Flexible Solutions International

Industry Overview - The Zacks Chemicals Specialty industry is facing challenges due to soft demand, particularly in Europe and China, alongside elevated input, supply chain, and logistics costs [1][5][7] - The industry consists of manufacturers producing specialty chemical products for various end-use markets, including textiles, automotive, and agriculture [3][4] Demand and Economic Conditions - Demand softness is noted in building and construction as well as industrial markets, primarily due to economic slowdowns in Europe and China [5][6] - Elevated borrowing costs and inflation are negatively impacting the residential construction industry, contributing to weakened manufacturing activities [6][7] Cost Pressures - Specialty chemical manufacturers are experiencing inflation in raw material costs and disruptions in supply chains and freight transportation [7] - Although raw material costs have moderated, they remain higher than pre-pandemic levels, continuing to pressure margins [7] Strategic Measures - Companies in the specialty chemicals sector are implementing strategic measures such as cost-cutting, productivity improvements, and expansion into high-growth markets to navigate the challenging environment [2][8] - Actions to strengthen balance sheets and boost cash flows are also being prioritized [8] Industry Performance - The Zacks Chemicals Specialty industry has underperformed compared to the S&P 500 and the broader Zacks Basic Materials sector, with a loss of 20.1% over the past year [11] - The industry currently trades at an EV/EBITDA ratio of 22.1X, higher than the S&P 500's 17.59X and the sector's 11.84X [12] Company Highlights - Axalta Coating Systems: This company is benefiting from strength in its refinish business, with expected earnings growth of 7.2% for 2025 and a recent upward revision of 5.9% in earnings estimates [13][15] - Ingevity Corp: Expected to see earnings growth of 26.8% for 2025, with operational improvements and strategic acquisitions aiding performance [16][17] - Flexible Solutions International Inc.: This company has an expected earnings growth rate of 50% for 2025, with recent upward revisions of 12.5% in earnings estimates [19][20]