It has been about a month since the last earnings report for Huntsman (HUN). Shares have added about 8.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Huntsman due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Huntsman’s Q4 Earnings Miss, Revenues Beat Estimates
Huntsman reported net loss of $315 million or $1.43 per share in fourth-quarter 2018, against net income of $287 million or $1.00 in the year-ago quarter.
Barring one-time items, adjusted earnings per share were 52 cents in the quarter. The figure missed the Zacks Consensus Estimate of 55 cents.
Revenues were $2,236 million, up around 1.5% year over year. Also, the figure beat the Zacks Consensus Estimate of $2,123.2 million.
For 2018, the company generated net income of $650 million or $1.39 per share, down from $741 million or $2.61 a year ago.
Total revenues increased 12.2% year over year to $9,379 million.
Polyurethanes: Revenues in the segment fell around 2% year over year to $1,204 million due to lower MDI average selling prices, partly offset by higher sales volumes.
Performance Products: Revenues in the unit rose 9% to $560 million on the back of higher sales volumes and higher average selling prices.
Advanced Materials: Revenues in the unit increased around 3% to $266 million supported by higher average selling prices.
Textile Effects: Revenues in the division rose roughly 2% to $193 million. Results were driven by higher average selling prices, which was partly offset by lower sales volume along with the impact of a stronger U.S. dollar.
Huntsman generated free cash flow of $195 million during the fourth quarter, up from $190 million a year ago. As of Dec 31, 2018, it had $1,525 million of total cash and unused borrowing capacity. Long-term debt was $2,224 million, down 1.5% year over year.
Per Huntsman, the company continued to expand downstream and differentiated businesses through bolt-on acquisitions and investments. The company also strengthened balance sheet by entering into an expanded $1.2-billion senior unsecured revolver facility. Overall, it delivered one of the strongest quarterly result, despite headwinds like declining crude prices, strong customer destocking arising from seasonal slowdown and economic uncertainties.
Going forward, Huntsman will continue to globalize recent investments. Also, it will focus on the higher growth markets and expand downstream businesses. Moreover, the company will continue to make significant investments to support core long-term growth. This includes building a new MDI splitter at Geismar, LA facility, to support differentiated downstream growth. The company also intends to make additional bolt-on acquisitions as appropriate and maintain a balanced approach to buy back shares. Overall, it expects to generate strong free cash flow in 2019 and boost downstream businesses.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -30.76% due to these changes.
Currently, Huntsman has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Huntsman has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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