Why You Should Retain Huntsman (HUN) Stock in Your Portfolio
Huntsman Corporation HUN should gain from its investment in downstream businesses and differentiated product innovation as well as strategic acquisitions amid headwinds from demand weakness and input cost inflation.
The company’s shares are down 10.1% over a year, compared with the 10.7% rise of its industry.
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Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Downstream Expansion & Cost Synergies Aid HUN
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.
The company's Polyurethanes segment is well positioned for strong upside in the long term on the back of its focus on ramping up its high-value differentiated downstream portfolio. Substitution of MDI for less effective materials will remain a key driving factor for the MDI business. The Geismar MDI splitter project will expand the differentiated Polyurethanes business in the Americas.
Huntsman should also gain from significant synergies of acquisitions. Its strong liquidity and balance sheet leverage gives 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.
The company remains on track with its cost realignment and synergy plans and expects to achieve around $280 million of annualized run rate savings by the end of 2023. Its European restructuring program is expected to deliver roughly $40 million of additional savings by the end of this year.
High Input Costs, Weak Demand Ail
High levels of consumer destocking weighed on Huntsman’s performance in the first quarter. The company saw lower volumes resulting from destocking for all of its business segments, particularly in the Americas. It saw lower volumes in all regions due to significant destocking. The company is expected to continue to face pressure on volumes in the second quarter as high levels of destocking is expected to continue in the Americas. Volumes in the Polyurethanes segment is likely to be hurt by destocking in the construction end markets. Weaker demand in coatings, adhesives and general industrial markets in North America is also expected to continue to hurt volumes in Advanced Materials.
The company faces headwinds from higher raw material, logistics and supply-chain costs. The unfavorable impacts from higher costs of raw materials are likely to continue in the second quarter. Natural gas costs in Europe, despite the recent decline, remain significantly elevated compared to the U.S. Gulf Coast. Higher benzene costs are also likely to impact Polyurethanes margins in the second quarter.
Huntsman Corporation Price and Consensus
Huntsman Corporation price-consensus-chart | Huntsman Corporation Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include L.B. Foster Company FSTR, Gold Fields Limited GFI, and Linde plc LIN.
L.B. Foster currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for FSTR's current-year earnings has been stable over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
L.B. Foster’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 140.5%, on average. FSTR has gained around 7% in a year.
Gold Fields currently carries a Zacks Rank #1. The Zacks Consensus Estimate for GFI’s current-year earnings has been revised 4% upward in the past 60 days.
The consensus estimate for current-year earnings for GFI is currently pegged at $1.05, reflecting an expected year-over-year growth of 8.3%. Gold Fields’ shares have rallied roughly 51% in the past year.
Linde currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 4.4% upward in the past 60 days.
Linde beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 6.9% on average. LIN’s shares have shot up roughly 29% in the past year.
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Gold Fields Limited (GFI) : Free Stock Analysis Report
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Linde PLC (LIN) : Free Stock Analysis Report
