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1. Company Snapshot

1.a. Company Description

Stepan Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products.It operates through three segments: Surfactants, Polymers, and Specialty Products.The Surfactants segment offers surfactants that are used as principal ingredients in consumer and industrial cleaning products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients.


Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites.The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products.The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications.


It serves in the United States, France, Poland, the United Kingdom, Brazil, Mexico, and internationally.Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.

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1.b. Last Insights on SCL

Recent negative drivers behind Stepan Company's performance include: * Underperformance and volatility in the specialty chemicals market, particularly in the surfactants segment. * Current earnings and macro pressures persist, despite improved fundamentals with reduced CapEx and positive FCF. * Uncertainty around the timing of earnings recovery, tied to market diversification and growth potential. * No clear indication of a likely earnings beat in the recent earnings release, with quarterly earnings of $1.03 per share beating the Zacks Consensus Estimate of $0.64 per share, but not necessarily a positive surprise given the company's recent performance. * No significant share buyback activity mentioned in recent news, which could have been a positive catalyst for the stock.

1.c. Company Highlights

2. Stepan Company's 2025 Earnings: A Year of Transformation

Stepan Company's financial performance in 2025 was marked by a mixed bag, with adjusted EBITDA growth of 6% driven by disciplined pricing and cost management, favorable mix, and solid growth across all strategic businesses. However, the fourth quarter adjusted net loss was $500,000, down $0.02 per diluted share, primarily driven by lower Surfactants operating income and a less favorable effective tax rate. The actual EPS came out at '-0.02' relative to estimates at '0.35', indicating a significant miss. Consolidated adjusted EBITDA was $33.8 million, a 3% decrease from the prior year.

Publication Date: Mar -07

📋 Highlights
  • Full-Year Adjusted EBITDA Growth: 6% growth driven by pricing discipline, cost management, and strategic business expansion, with organic volume up 2%.
  • Q4 Adjusted Net Loss: $500K loss ($0.02 per diluted share), primarily due to lower Surfactants operating income and a less favorable tax rate.
  • Balance Sheet Strength: Net debt reduced to $494M ($32M decline YoY), with a net leverage ratio of 2.5x trailing EBITDA and $25.4M free cash flow.
  • Project Catalyst Savings: $100M pretax savings target over two years (60% in 2026) through asset optimization, including facility closures and automation investments.
  • Oleochemical Price Impact: Escalating 2025 oleochemical costs reduced EBITDA, but lower 2026 prices and improved CNO-PKO spread ($200 vs. historical $130–150) are expected to offset losses.

Segment Performance

The company's organic volume increased 2% year over year, driven by strong growth in crop productivity, oilfield, and specialty products. Luis E. Rojo, President and Chief Executive Officer, highlighted that 2025 was a transformational year for Stepan, with the divestment of two manufacturing plants, progress on optimizing the global footprint, and positioning the company for a more disciplined and resilient operating model.

Project Catalyst and Cost Savings

The company announced Project Catalyst, a comprehensive plan to optimize the asset base and create a more productive, agile, and accountable organization. The project is expected to deliver around $100 million in pretax savings over the next two years, with approximately 60% of the savings expected in 2026. This initiative is expected to drive growth and improve profitability.

Valuation and Outlook

With a P/E Ratio of 23.41 and an EV/EBITDA of 8.06, the market is pricing in a certain level of growth. Analysts estimate next year's revenue growth at 5.2%. The company's commitment to shareholder returns is evident in the 58th consecutive year of dividend increase, with a Dividend Yield of 3.25%. However, the Net Debt / EBITDA ratio of 2.74 may raise concerns about the company's leverage. As the company navigates the challenges of oleochemical raw material costs and pricing actions, its focus on tier two and tier three customers, as well as sulfate-free products, is expected to drive growth.

Key Takeaways

The company's CapEx guidance for 2026 is $105-115 million, which is lower than previous years but still includes some growth capital projects. With a focus on managing working capital and ensuring the right inventory levels, Stepan is well-positioned to drive EBITDA growth in 2026, despite the expected negative impact of weather conditions in the first half. The ROE of 3.8% and ROIC of 2.71% indicate room for improvement in terms of profitability.

3. NewsRoom

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Stepan Company: The Ride Higher Isn't Over Yet

Mar -28

Source: seekingalpha.com

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Stepan Company: Upside Unclear, Better Alternatives Exist

Feb -25

Source: seekingalpha.com

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3 Dividend Kings That Have Raised Payouts for 50+ Years and Still Look Cheap

Feb -24

Source: 247wallst.com

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Stepan (NYSE:SCL) Shares Gap Down After Earnings Miss

Feb -24

Source: defenseworld.net

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Stepan Company (SCL) Q4 2025 Earnings Call Transcript

Feb -23

Source: seekingalpha.com

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Stepan Co. (SCL) Reports Q4 Loss, Misses Revenue Estimates

Feb -23

Source: zacks.com

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Stepan Reports Fourth Quarter and Full Year 2025 Results

Feb -23

Source: prnewswire.com

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Stepan Declares Quarterly Dividend

Feb -23

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.61%)

6. Segments

Surfactants

Expected Growth: 6.5%

Stepan Company's 6.5% growth in Surfactants is driven by increasing demand for personal care products, rising adoption of eco-friendly and sustainable surfactants, and growing use in industrial applications such as oilfield chemicals and lubricants. Additionally, strategic acquisitions and expansion into emerging markets have contributed to the company's growth.

Polymers

Expected Growth: 6.8%

Stepan Company's 6.8% growth in Polymers is driven by increasing demand for sustainable and eco-friendly products, expansion in the construction and automotive industries, and strategic investments in R&D to develop innovative polymer solutions. Additionally, the company's focus on operational efficiency and cost savings initiatives have contributed to the growth.

Specialty Products

Expected Growth: 7.2%

Stepan Company's Specialty Products segment growth of 7.2% is driven by increasing demand for natural and sustainable ingredients in personal care and food products, expansion into emerging markets, and strategic acquisitions. Additionally, the company's focus on innovation and R&D investments in high-growth areas such as natural oils and bio-based products also contribute to the segment's growth.

7. Detailed Products

Surfactants

Stepan Company's surfactants are a class of specialty chemicals used in a wide range of applications, including personal care, household cleaning, and industrial processes.

Polyurethane Polyols

Stepan Company's polyurethane polyols are used in the production of flexible and rigid foam, coatings, adhesives, and sealants.

Specialty Esters

Stepan Company's specialty esters are used in a variety of applications, including personal care, pharmaceuticals, and industrial processes.

Amphoteric Surfactants

Stepan Company's amphoteric surfactants are used in personal care products, such as shampoos, conditioners, and body washes.

Quaternary Compounds

Stepan Company's quaternary compounds are used in a variety of applications, including personal care, pharmaceuticals, and industrial processes.

8. Stepan Company's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Stepan Company is moderate due to the presence of alternative products in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the large number of customers and the availability of alternative products.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's large size and negotiating power.

Threat Of New Entrants

The threat of new entrants is moderate due to the moderate barriers to entry and the availability of resources.

Intensity Of Rivalry

The intensity of rivalry is high due to the large number of competitors and the high stakes in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 35.44%
Debt Cost 4.87%
Equity Weight 64.56%
Equity Cost 8.11%
WACC 6.96%
Leverage 54.90%

11. Quality Control: Stepan Company passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Ecovys

A-Score: 5.2/10

Value: 7.6

Growth: 3.3

Quality: 4.1

Yield: 5.0

Momentum: 6.0

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Perimeter Solutions

A-Score: 4.9/10

Value: 1.2

Growth: 8.2

Quality: 6.6

Yield: 0.0

Momentum: 9.5

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
Core Molding Technologies

A-Score: 4.9/10

Value: 5.5

Growth: 5.9

Quality: 4.8

Yield: 0.0

Momentum: 7.5

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Stepan

A-Score: 4.7/10

Value: 7.3

Growth: 3.3

Quality: 4.4

Yield: 5.0

Momentum: 1.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Koppers

A-Score: 4.0/10

Value: 6.6

Growth: 4.9

Quality: 3.0

Yield: 1.0

Momentum: 2.5

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
Ingevity

A-Score: 3.7/10

Value: 6.3

Growth: 2.0

Quality: 3.6

Yield: 0.0

Momentum: 6.0

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

50.01$

Current Price

50.01$

Potential

-0.00%

Expected Cash-Flows