Chemical companies leveraged to North American housing are showing modest growth despite some slowdown in Europe, with the paint and coatings segment as an interesting space for its defensive qualities in a soft demand environment, says Ivan Marcuse, an Equity Research Analyst at KeyBanc Capital Markets Inc.
“Chemical companies with heavy exposure to Europe are likely seeing slowing in those markets, and even China is beginning to see a lower level of growth, which will definitely impact volumes for some companies in my space,” he said. “Right now, outside-of-Europe demand is not exactly humming, but it’s not all awful across the board.”
Marcuse likes Compass Minerals International Inc. (CMP) because it is a stock that has been out of favor due to several weather-related issues, but it is primarily tied to North America, and is a good defensive stock. He says CMP has solid returns, decent cash flow, a nice dividend and little European risk.
“Any paint and coatings company with large exposure to North America is in a better position than most right now,” he said. “On the architectural side, paint tends to be replacement driven. Even in areas where there is a slowdown, it tends to be fairly resilient.”
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