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What's in the Cards for Huntsman (HUN) in Q4 Earnings?

Anindya Barman

Huntsman Corporation HUN is set to release fourth-quarter 2018 results before the opening bell on Feb 12.

The chemical maker swung to a net loss of $8 million or 5 cents per share in the third quarter from a net income of $179 million or 60 cents recorded a year ago. Adjusted earnings were 84 cents per share in the quarter, in line with the Zacks Consensus Estimate.

Revenues rose around 13% year over year to $2,444 million on higher sales across all segments. It beat the Zacks Consensus Estimate of $2,239 million.

Huntsman has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a positive average earnings surprise of roughly 14%.

The company’s shares have lost around 29.1% over a year, underperforming the industry's decline of 16.6%.


 

Let's see how things are shaping up for this announcement.

Factors to Watch For

Huntsman, in its third-quarter call, stated that it continues to strengthen its balance sheet and remains committed to a balanced approach to capital allocation by growing its downstream businesses portfolio while creating shareholder value.

Revenues for Huntsman for the fourth quarter is projected to fall roughly 3.6% year over year as the Zacks Consensus Estimate for the quarter is currently pegged at $2,123 million.

Revenues from Huntsman’s Polyurethanes segment is anticipated to witness a 7.3% rise year over year as the Zacks Consensus Estimate for the fourth quarter is pegged at $1,316 million.

Huntsman remains committed to grow its downstream specialty and formulation businesses. The company is seeing healthy demand for MDI (methylene diphenyl diisocyanate). Substitution of MDI for less effective materials remains a key driving factor.

Moreover, the acquisition of Demilec, a leading manufacturer and distributor of spray polyurethane foam (SPF) insulation systems in North America, is expected to contribute to volume growth in Polyurethanes in the December quarter.

However, the company expects its Polyurethanes business to be affected by seasonality in the fourth quarter as it is seeing customer destocking through the supply chain amid global trade tensions and a weaker growth picture in China. It expects this to offset the incremental benefits of its expansion actions in China. The company also does not expect any benefits of margin spike in its MDI Urethanes business in the fourth quarter. It envisions margins in its downstream Urethanes businesses to remain stable in the quarter.

Revenues for the company’s Performance Products unit are expected to remain flat year over year as the Zacks Consensus Estimate for the fourth quarter is $514 million.

While seasonality is also expected to affect the Performance Products segment, Huntsman expects improved results in amines and maleic anhydride and steady performance in surfactants to be offset by lower upstream margin in the fourth quarter.

Revenues for Huntsman’s Advanced Materials segment are projected to decline 3.9% from the year-ago quarter as the Zacks Consensus Estimate for the fourth quarter stands at $248 million.

Within this segment, Huntsman is seeing higher volumes in the specialty business. However, the company continues to face headwind from higher raw material costs. The company is also seeing weaker orders from certain customers, mostly in automotive markets in China. It expects this softness to contribute to the seasonality in this segment in the fourth quarter.

Meanwhile, the company’s Textile Effects segment is expected to witness a 5.3% rise in revenues year over year as the Zacks Consensus Estimate is pegged at $200 million for the fourth quarter. The company is seeing weaker customer order in certain regions and markets. While the segment remains affected by higher raw material costs, it will likely gain from growth in specialty products.

Huntsman Corporation Price and Consensus

 

Huntsman Corporation Price and Consensus | Huntsman Corporation Quote

What the Zacks Model Says

Our proven model does not show that Huntsman is likely to beat estimates this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:

Earnings ESP: Earnings ESP for Huntsman is -1.22%. This is because the Most Accurate Estimate is currently pegged at 54 cents while the Zacks Consensus Estimate stands at 55 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Huntsman currently carries a Zacks Rank #4 (Sell). Note that we caution against stocks with a Zacks Rank #4 or #5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:

Eldorado Gold Corporation EGO has an Earnings ESP of +9.48% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

New Gold Inc. NGD has an Earnings ESP of +133.3% and carries a Zacks Rank #3.

Quaker Chemical Corporation KWR has an Earnings ESP of +2.99% and carries a Zacks Rank #3.

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