Why Chemours shares soared more than 10% today
Shares in a chemical company Chemours (NYSE: CC) were up nearly 10% as of 3 p.m. EDT today. The move marks an industry-wide shift in opinion towards chemical companies, especially titanium dioxide suppliers like Chemours and its peers Kronos in the world, Tronox, and Venator Materials. Titanium dioxide is an essential ingredient in paints, coatings and packaging, among other industries.
In short, the sector has been beaten in recent months as it has become clear that supply chain difficulties are hitting the industrial sector and impacting sales volumes. For example, in early September, a large paint and coatings company, PPG Industries, warned: “The disruption in the supply of coating products has deteriorated further since the company’s earnings announcement on July 19. Management also said that “sales volumes in the third quarter of 2021 will be $ 225 million to $ 275 million lower than the company forecast at the start of the third quarter.”
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This is not good news for titanium dioxide suppliers. Thus, the market sold stocks like Chemours in anticipation of a disappointing third quarter.
There is a feeling that the sale has gone too far, leaving the area as good value. Indeed, Chemours rival Tronox reportedly drew a cash offer from a private equity firm that skyrocketed the stock – a sure sign of value in the industry.
In addition, another paint and coatings company, Axalta Coating Systems, recently told investors that its volume levels would be lower than previous forecasts due to supply chain disruptions. However, the action has been on the rise since the update a week ago and continues to look like good value.
The market knows the third quarter will not be good for Chemours. Yet, he also knows that a business’s value isn’t based on a quarter or two’s results, primarily as supply chain issues boil down to issues that may prove to be temporary. Therefore, investors should focus on what Chemours and others are saying about future demand conditions rather than what will happen in the third and fourth quarters.
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Lee Samaha has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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