Mat-Chem Notes for the week ended December 12, 2021



KEY HIGHLIGHTS
  • WTR-CMI last week. Major indexes were mixed last week, with the S&P 500 appreciating 1.7%, while the broader Russell 2000 declined (1%). Our WTR-CMI index of 300 chemicals and materials technology companies was flat. Seven of the stocks in the index exceeded the S&P 500’s returns; overall, 16 delivered a positive return. The 27% YTD appreciation of the WTR-SMI continues to outpace the S&P 500’s 24% and the Russell 2000’s 10.4% returns, as companies in our index benefit from sustainability-driven mega trends and growing investor interest.
  • Winners and losers. Shares of EMN rose 5.0%, making it our top performer for the week, bolstered by an upbeat Innovation Day, where the company laid out its 2024 targets, announced a 10% dividend increase, and a $500M accelerated share repurchase program. CMP rebounded 4.2% as the impact of a sharp and somewhat unexpected dividend cut announced following a changing capital allocation strategy began to wane. AVNT fell (5.6%), making it our worst performer of the week as its Investor Day failed to ignite a positive response.
  • EMN outlines 2024 targets. At its recently held Innovation Day, the company provided targets of 8-12% annual EPS growth over the next three years, EBITDA margin improvement to ~23%, and deriving $450M-plus of EBITDA by 2026 from its molecular recycling technology that we mentioned last week. The performance is expected to be driven by specialty products, which are expected to grow at 2x the rate of underlying markets. While investors appeared pleased with the guidance, as is evident from the stock’s performance afterward, we note that execution risks remain as EMN continues on its long journey from a commodity and intermediates to a specialty chemicals and materials company.
  • FMC and CTVA extend their supply agreement. In 2017, FMC purchased DuPont’s (NYSE: DD) insecticide portfolio when DuPont and Dow (NYSE: DOW) merged their ag businesses, and then eventually spun it off as Corteva. Last week the two companies announced a multi-year extension of the agreement to provide Rynaxypyr® and Cyazypyr® active ingredients (insecticides) to Corteva for use in the latter’s seed treatment products.
WTR-CMI WEEKLY PERFORMANCE

WTR-CMI last week. Major indexes were mixed last week, with the S&P 500 appreciating 1.7%, while the broader Russell 2000 declined (1%). Our WTR-CMI index of 300 chemicals and materials technology companies was flat. Seven of the stocks in the index exceeded the S&P 500’s returns; overall, 16 delivered a positive return. The 27% YTD appreciation of the WTR-SMI continues to outpace the S&P 500’s 24% and the Russell 2000’s 10.4% returns, as companies in our index benefit from sustainability-driven mega trends and growing investor interest.

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