Specialty Chemical Stocks Remain Materially Undervalued Following Decent Third-Quarter Results

We have two key takeaways following third-quarter results from the three narrow-moat specialty chemical producers we cover: Celanese, DuPont, and Eastman. First, specialty chemical producers' pricing power is intact. The specialty businesses of Celanese, DuPont, and Eastman all saw price increases at or above the level of cost inflation. This is consistent with our view that specialty chemical producers can pass along cost inflation. As cost inflation moderates in 2023, we expect the price increases will largely remain in place. On its own, this would allow producers to recover profits.