3 Chemicals Stocks Driving The Industry Higher

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 100 points (0.6%) at 16,838 as of Thursday, June 5, 2014, 3:55 PM ET. The NYSE advances/declines ratio sits at 2,349 issues advancing vs. 623 declining with 153 unchanged.

The Chemicals industry as a whole closed the day up 1.1% versus the S&P 500, which was up 0.6%. Top gainers within the Chemicals industry included NL Industries ( NL), up 3.5%, Oil-Dri Corp of America ( ODC), up 3.9%, Ceres ( CERE), up 4.4%, KMG Chemicals ( KMG), up 2.5% and Arabian American Development ( ARSD), up 9.2%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

KMG Chemicals ( KMG) is one of the companies that pushed the Chemicals industry higher today. KMG Chemicals was up $0.38 (2.5%) to $15.84 on light volume. Throughout the day, 9,172 shares of KMG Chemicals exchanged hands as compared to its average daily volume of 22,200 shares. The stock ranged in a price between $15.25-$15.91 after having opened the day at $15.36 as compared to the previous trading day's close of $15.46.

KMG Chemicals, Inc., through its subsidiaries, is engaged in the manufacture, formulation, and distribution of specialty chemicals primarily in the United States, Canada, Mexico, Europe, and Asia. It operates in two segments, Electronic Chemicals and Wood Treating Chemicals. KMG Chemicals has a market cap of $179.8 million and is part of the basic materials sector. Shares are down 8.5% year-to-date as of the close of trading on Wednesday. Currently there are no analysts who rate KMG Chemicals a buy, no analysts rate it a sell, and 1 rates it a hold.

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TheStreet Ratings rates KMG Chemicals as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on KMG go as follows:

  • The revenue growth greatly exceeded the industry average of 11.3%. Since the same quarter one year prior, revenues rose by 47.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 240.89% to $7.79 million when compared to the same quarter last year. In addition, KMG CHEMICALS INC has also vastly surpassed the industry average cash flow growth rate of 37.62%.
  • The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Chemicals industry and the overall market, KMG CHEMICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of KMG CHEMICALS INC has not done very well: it is down 23.07% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

You can view the full analysis from the report here: KMG Chemicals Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

At the close, Ceres ( CERE) was up $0.03 (4.4%) to $0.66 on light volume. Throughout the day, 69,372 shares of Ceres exchanged hands as compared to its average daily volume of 543,700 shares. The stock ranged in a price between $0.63-$0.66 after having opened the day at $0.65 as compared to the previous trading day's close of $0.63.

Ceres, Inc., an agricultural biotechnology company, develops and sells energy crops to produce renewable bioenergy feedstocks in North America. Ceres has a market cap of $31.3 million and is part of the basic materials sector. Shares are down 52.9% year-to-date as of the close of trading on Wednesday. Currently there are 2 analysts who rate Ceres a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Ceres as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on CERE go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CERES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • CERE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 69.01%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • CERE, with its very weak revenue results, has greatly underperformed against the industry average of 3.0%. Since the same quarter one year prior, revenues plummeted by 51.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • CERES INC has improved earnings per share by 19.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CERES INC reported poor results of -$1.31 versus -$1.22 in the prior year. This year, the market expects an improvement in earnings (-$0.90 versus -$1.31).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 19.4% when compared to the same quarter one year prior, going from -$8.97 million to -$7.23 million.

You can view the full analysis from the report here: Ceres Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

NL Industries ( NL) was another company that pushed the Chemicals industry higher today. NL Industries was up $0.29 (3.5%) to $8.70 on light volume. Throughout the day, 9,267 shares of NL Industries exchanged hands as compared to its average daily volume of 19,700 shares. The stock ranged in a price between $8.41-$8.80 after having opened the day at $8.41 as compared to the previous trading day's close of $8.41.

NL Industries, Inc., through its subsidiary, CompX International Inc., operates in the component products industry in the United States and internationally. NL Industries has a market cap of $410.8 million and is part of the basic materials sector. Shares are down 24.8% year-to-date as of the close of trading on Wednesday. Currently there are no analysts who rate NL Industries a buy, 1 analyst rates it a sell, and none rate it a hold.

TheStreet Ratings rates NL Industries as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins.

Highlights from TheStreet Ratings analysis on NL go as follows:

  • The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues rose by 20.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.64, which clearly demonstrates the ability to cover short-term cash needs.
  • NL INDUSTRIES reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NL INDUSTRIES swung to a loss, reporting -$1.13 versus $1.16 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus -$1.13).
  • NL's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.23%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Commercial Services & Supplies industry and the overall market, NL INDUSTRIES's return on equity significantly trails that of both the industry average and the S&P 500.

You can view the full analysis from the report here: NL Industries Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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