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Bernstein Names Top 5 Chemical Stocks, Citing Industrial Gas Strength
Summary
Bernstein has identified five top picks in the chemicals sector, favoring industrial gas companies like Linde and Air Products for their strong execution and margin potential.
Investment firm Bernstein has outlined its top five stock picks in the chemicals sector, expressing a clear preference for the industrial gases subsector. The firm's analysis highlights companies with strong operational execution, potential for margin improvement, and strategic shifts that could unlock shareholder value.
Industrial Gases Lead the Pack
Bernstein's note emphasized the appeal of industrial gas companies, pointing to their consistent performance and defensive characteristics. The firm's top selections in this area include:
- Linde (LIN): Rated 'Outperform' with a $561 price target. Bernstein called Linde the "best-run" company in the space, citing 29 consecutive quarterly earnings per share beats and its role as a safe-haven asset amid uncertainty. Growth is expected from electronics, helium demand, and the space industry.
- Air Products (APD): Rated 'Outperform' with a $344 price target. The firm sees potential in the new CEO's strategic shift back to a traditional industrial gases model focused on returns and discipline. Bernstein noted an attractive valuation and investor focus shifting to the NEOM hydrogen project.
- Air Liquide (AIRP): Rated 'Outperform' with a €207 price target. While the company has improved profitability, Bernstein believes it still has significant room to increase margins to catch up with industry leader Linde, potentially for over two decades.
AdCyclical and Strategic Opportunities
Beyond industrial gases, Bernstein identified opportunities in companies positioned for a cyclical recovery or benefiting from strategic restructuring.
- BASF (BASFn): Rated 'Outperform' with a €61 price target, implying 25% upside. Bernstein sees signs of an earnings recovery and expects the company's upstream chemicals business to perform well. A potential IPO of its Agricultural Solutions business in 2027 is seen as a key catalyst for unlocking value.
- PPG Industries (PPG): Rated 'Outperform' with a $130 price target. The firm highlighted PPG's focus on organic growth and portfolio refinement over large acquisitions. Bernstein cited the company's attractive valuation and strong execution as key positives, despite potentially difficult market conditions for the broader paints and coatings industry.
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