Here's Why You Should Retain Huntsman Stock in Your Portfolio
Huntsman Corporation HUN is expected to gain from its investment in downstream businesses, differentiated product innovation, strategic acquisitions and cost actions amid headwinds from soft demand in certain markets and pricing pressure.
HUN’s shares have lost 5.6% year to date compared with a 0.8% rise of its industry.
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Let’s find out why HUN stock is worth retaining at the moment.
Downstream Expansion & Cost Synergies Aid HUN Stock
Huntsman remains focused on growing its downstream specialty and formulation businesses and is shifting its MDI (methylene diphenyl diisocyanate) business from components to differentiated systems that typically have higher margins and lower volatility.
HUN’s Polyurethanes segment is well positioned for a strong upside in the long term on the back of its focus on ramping up its high-value differentiated downstream portfolio. The substitution of MDI for less effective materials will remain a key driving factor for the MDI business.
The company should also gain from significant synergies of acquisitions. Its strong liquidity and balance sheet leverage give it adequate flexibility to continue to develop and expand its core businesses through acquisitions and internal investments. The acquisitions of CVC Thermoset and Gabriel Performance Products are contributing to EBITDA in the Advanced Materials segment.
HUN remains committed to its cost realignment and synergy objectives. It realized more than $280 million in run rate savings at the end of 2023. It sees additional cost-improvement opportunities in 2024, focusing on manufacturing cost efficiency and the completion of European restructuring activities. Huntsman expects roughly $60 million of in-year cost optimization benefits, excluding inflation, in 2024.
Demand & Pricing Headwinds Ail Huntsman
Huntsman saw challenges from demand softness and significant de-stocking in 2023. Demand conditions in Europe weakened last year due to high levels of natural gas prices. Demand in China was impacted by reduced economic growth resulting from the pandemic-led restrictions and lower construction activities.
Although demand has improved of late in these regions, the lingering impacts of sluggish demand in certain markets are likely to continue in the near term. The residential construction market remains sluggish in China. MDI demand also remains weak in Europe due to elevated energy costs.
Huntsman also faces headwinds from pricing pressure. Lower selling prices across its segments weighed on its top line in the second quarter. A less favorable supply-demand environment contributed to the fall in MDI prices. Competitive pressures, particularly in Europe and the Americas, is also affecting the Performance Products segment. Weaker prices are likely to continue to impact HUN’s results in the third quarter.
Huntsman Corporation Price and Consensus
Huntsman Corporation price-consensus-chart | Huntsman Corporation Quote
HUN’s Zacks Rank & Other Key Picks
HUN currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the Basic Materials space are IAMGOLD Corporation IAG, Cabot Corporation CBT and Axalta Coating Systems Ltd. AXTA. While IAMGOLD sports a Zacks Rank #1 (Strong Buy), Cabot and Axalta Coating carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for IAMGOLD’s current-year earnings has increased by 45.4% in the past 60 days. IAG beat the consensus estimate in each of the last four quarters with the average surprise being 200%. Its shares have shot up roughly 157% in the past year.
The consensus estimate for Cabot’s current fiscal year earnings is pegged at $7.07 per share, indicating a year-over-year rise of 31.4%. The consensus estimates for CBT’s current-year earnings has increased by 4.3% in the past 60 days. The company's shares have rallied roughly 62% in the past year.
The Zacks Consensus Estimate for Axalta Coating’s current year earnings is pegged at $2.07, indicating a rise of 31.9% from year-ago levels. The Zacks Consensus Estimate for AXTA’s current year earnings has increased 2.5% in the past 60 days. The stock has gained around 32% in the past year.
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