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Huntsman Provides Q1 Updates, Soft Demand to Hurt Margins

Zacks Equity Research

Huntsman Corporation HUN provided updates on its first-quarter 2019 outlook.

The company stated that its largest business unit — Polyurethanes — is witnessing improving trends in China. However, lower demand in the North American automotive market, a slower-than-expected seasonal pickup in construction-related markets along with softer demand trends across most of the major European markets are more than offsetting the improvement in China.

For the first quarter, Huntsman expects weaker performance in the Polyurethanes business compared with earlier expectations due to overall softer volumes. The company expects the margins in the downstream business to remain stable.

The company envisions that results in the Performance Products unit to be flat-to-down compared with fourth-quarter 2018 tally. Notably, Huntsman previously expected the segment’s performance to be flat-to-up due to weaker oilfield chemical demand and weather-related delays in the agricultural markets.

The Advanced Materials unit is also witnessing similar softness in construction and coatings. Nevertheless, the company still expects first-quarter results to be modestly up sequentially from fourth-quarter figure and at par with prior projections.

The Textile Effects unit continues witness persistent challenges in China, which is resulting in softer-than-expected volumes. Overall, it expects the segmental results to be at par with fourth-quarter tally.  

Based on the above-mentioned changes to the outlook, the company projects first quarter consolidated adjusted EBITDA to be roughly 10% lower from the the fourth quarter. This is largely due to a softer European economy and a slower seasonal pickup in North America.

Notably, the company has reaffirmed 2019 guidance. It continues to expect adjusted EBITDA to be 5-7% lower than 2018 projections.   

Huntsman's shares have lost around 27.7% in the past year compared with the industry’s 15.2% decline.



Zacks Rank & Key Picks

Huntsman currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd. KL, Ingevity Corporation NGVT and Materion Corporation MTRN, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland has an expected earnings growth rate of 8.8% for 2019. The company’s shares have surged 118.8% in the past year.

Ingevity has an expected earnings growth rate of 17.9% for the current year. The company’s shares have rallied 40.7% in a year’s time.

Materion has an expected earnings growth rate of 12.6% for 2019. Its shares have gained 5.4% in a year’s time.

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