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Why You Should Retain Huntsman (HUN) Stock in Your Portfolio

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Huntsman Corporation HUN is gaining from its investment in downstream businesses and differentiated product innovation as well as strategic acquisitions amid certain headwinds including input cost inflation.

The company’s shares are up 6.7% over a year, compared with the 14.3% decline of its industry.

 

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Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

What’s Working in HUN’s Favor?

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 recent acquisitions of CVC Thermoset and Gabriel Performance Products are significantly contributing to EBITDA in the Advanced Materials segment.

The company expects to deliver around $240 million of annualized cost optimization and acquisition run rate synergies by the end of 2023. It expects to achieve acquisitions-related run rate synergies of roughly $55 million by first-quarter 2023.

A Few Headwinds

The company faces headwinds from a spike in raw material, logistics and supply-chain costs as witnessed in the first quarter of 2022. Supply disruptions have led to a rise in raw material costs. The unfavorable impacts from higher costs of raw materials are likely to continue in the second quarter. Huntsman sees higher costs, especially in Europe, to remain a headwind in the second quarter. As such, higher raw material costs may impact margins.

Semiconductor shortages have also caused a slowdown in automotive production rates globally. The company faced headwind from pressure on automotive volumes in the first quarter due to the impact of chip shortage. Demand weakness in automotive is likely to continue in the near term. Some volume pressure is also expected in the second quarter due to new restrictions in China following a surge in coronavirus cases in the country.

 

Huntsman Corporation Price and Consensus

 

Huntsman Corporation Price and Consensus
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 Nutrien Ltd. NTR, Cabot Corporation CBT and Allegheny Technologies Inc. ATI.

Nutrien, sporting a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 174.6% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 22.9% upward over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 5.8%, on average. NTR has gained roughly 30% in a year.

Cabot, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 22.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 6% upward in the past 60 days.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 9% over a year.

Allegheny has a projected earnings growth rate of 1,076.9% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 40.4% upward in the past 60 days.

Allegheny’s earnings beat the Zacks Consensus Estimate in the last four quarters. It has a trailing four-quarter earnings surprise of roughly 128.9%, on average. ATI has gained around 7% in a year and currently sports a Zacks Rank #1.


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Allegheny Technologies Incorporated (ATI) : Free Stock Analysis Report
 
Cabot Corporation (CBT) : Free Stock Analysis Report
 
Huntsman Corporation (HUN) : Free Stock Analysis Report
 
Nutrien Ltd. (NTR) : Free Stock Analysis Report
 
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