4 Diversified Chemical Stocks to Gain Amid Stable End-market Demand

About the Industry

The Zacks Chemicals Diversified industry consists of manufacturers of basic chemicals, plastics, specialty chemicals and agricultural chemicals. Companies in this space serve a host of end markets, such as automotive, building & construction, transportation, electronics, aerospace and agriculture. Basic chemicals are produced in large quantities and include petrochemicals and intermediates (such as ethylene, propylene and benzene), polymers (including plastic resins such as polyethylene, polypropylene and polyvinyl chloride) and inorganic chemicals (such as chlorine, caustic soda and titanium dioxide). Specialty chemicals that include catalysts, specialty polymers and coating additives are used in specific fields based on their performance. Agricultural chemicals include herbicides, fungicides and insecticides that are used to protect crops from disease, pests and weeds.

What's Shaping the Future of the Chemicals Diversified Industry?

Resilient End-market Demand: Companies in the chemical-diversified space are expected to benefit from an uptick in demand in certain major markets from the lows witnessed last year. The automotive sector represents a crucial end market for chemical manufacturers. A decline in global vehicle production last year weighed on demand from this segment. Elevated interest rates, coupled with economic slowdown concerns and tariff-related uncertainties, further pressured the market. The automotive industry is expected to rebound this year, supported by accelerating electric vehicle adoption as governments worldwide advance carbon-neutral initiatives. Better affordability, robust demand for hybrid models and promotional incentives are expected to lift new vehicle sales. Chemical companies are also seeing signs of a recovery in demand across the construction and electronics markets. Demand in healthcare, agriculture and packaging markets also remains steady. Customer inventory destocking in building & construction and consumer durables has largely ended, leading to low inventory levels. This is expected to lead to an uptick in chemical demand and volumes. Demand in the United States is expected to be backed by resilient consumer spending and healthy economic activities.

Self-help Actions to Aid Results: Companies in this space are taking a host of strategic measures, including cost-cutting and productivity improvement, operational efficiency improvement, and actions to strengthen the balance sheet and boost cash flows. In particular, the industry participants are aggressively implementing actions to lower costs. The industry participants are also raising selling prices to counter raw material, energy and logistics cost inflation amid significant disruptions from the Middle East conflict. Such moves are likely to help the industry sustain margins amid the prevailing challenges.

Sluggishness in Europe and China Is a Worry: In China, a slower recovery in economic activities is hurting chemical demand. China is seeing slower economic growth and a sluggish real estate market amid a decline in new home prices, property investment and housing sales. A weak property market and a slowdown in infrastructure investments have led to softer demand. The slowdown in Europe, resulting from low consumer confidence and weaker consumer spending due to high levels of inflation and high interest rates, has also led to softer demand in that region. Energy and feedstock inflation has lowered industrial production and consumer spending in Europe. 

Zacks Industry Rank Indicates Upbeat Prospects

The Zacks Chemicals Diversified industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #101, which places it at the top 41% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates a bright near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

 

Industry Underperforms Sector & S&P 500

The Zacks Chemicals Diversified industry has underperformed both the Zacks S&P 500 composite and the broader Zacks Basic Materials sector over the past year.

The industry has gained 6.7% over this period compared with the S&P 500’s rise of 23.7% and the broader sector’s increase of 28.9%.

One-Year Price Performance

Industry's Current Valuation

On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing chemical stocks, the industry is currently trading at 11.63X, below the S&P 500’s 18.16X and the sector’s 13.19X.

Over the past five years, the industry has traded as high as 16.05X, as low as 5.31X and at the median of 10.28X, as the chart below shows.

Enterprise Value/EBITDA (EV/EBITDA) Ratio

Enterprise Value/EBITDA (EV/EBITDA) Ratio

4 Chemicals Diversified Stocks to Keep a Close Eye on

Air Products: Based in Pennsylvania, Air Products is a leading industrial gases company. It is benefiting from investments in high-return projects, new business deals, acquisitions and productivity initiatives. The company remains committed to its gasification strategy and is executing its growth projects. These projects are expected to be accretive to earnings and cash flows. APD is also boosting productivity to improve its cost structure. It is seeing the positive impacts of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to support its margins. 

Air Products, a Zacks Rank #2 (Buy) stock, has expected earnings growth of 11.6% for fiscal 2026. The Zacks Consensus Estimate for fiscal 2026 earnings has gone up 1.8% over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: APD

DuPont: Delaware-based DuPont provides technology-based materials and solutions to markets including electronics, transportation, construction and water. DuPont remains focused on driving growth through innovation and new product development. Its innovation-driven investment is focused on several high-growth areas. DD remains committed to driving returns from its R&D investment. The acquisition of Spectrum Plastics Group also strengthened DuPont’s position in stable and fast-growing healthcare end markets. DuPont is also benefiting from cost synergy savings and productivity improvement actions. The company remains focused on driving cash flow and returning value to its shareholders. It aims to boost cash flow through working capital productivity and earnings growth. 

DuPont, carrying a Zacks Rank #2, has a projected earnings growth rate of around 44.3% for 2026. DD beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 8.3%.

Price and Consensus: DD

Avient: Ohio-based Avient is a global specialty-materials company focused on color, additives, inks, engineered polymers, advanced composites, and performance fibers, combining materials science, formulation expertise and manufacturing scale. Avient's defense, healthcare, telecom and chip packaging mix, along with disciplined productivity, is sustaining margins and earnings. Additional margin expansion is expected from price/mix and productivity in 2026. Sourcing and footprint actions, deleveraging and cash generation provide downside protection, while Dyneema process improvements and capacity investments support multi-year growth. Capital allocation prioritizes further debt reduction in 2026.  

Avient, a Zacks Rank #2 stock, has expected earnings growth of 13.5% for 2026. The Zacks Consensus Estimate for AVNT’s 2026 earnings has been revised 3.9% higher over the past 60 days. The company beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 3.4%.

Price and Consensus: AVNT

Innospec: Based in Colorado, Innospec develops, manufactures, blends, markets, and supplies specialty chemicals to customers across the Americas, Europe, the Middle East, Africa, and Asia-Pacific. Innospec is expected to benefit from the strength of its Oilfield Services unit and strategic growth initiatives. Oilfield Services is gaining from its recent drag-reducing agent plant expansion and growing opportunities to supply the technology to customers.  Ongoing plant repairs, process improvements and upgrades at its North Carolina plants are expected to aid the Performance Chemicals unit. Fuel Specialties, meanwhile, is also advancing opportunities across its established and newer end markets.

Innospec is a Zacks Rank #2 stock. The consensus estimate for IOSP’s 2026 earnings has been revised 4.8% higher over the past 60 days. The company beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 12.9%.

Price and Consensus: IOSP

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This article originally published on Zacks Investment Research (zacks.com).

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