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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 certain headwinds including input cost inflation.

The company’s shares are down 19.3% over a year, compared with the 0.2% rise of its industry.

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

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

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 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. Its new European restructuring program is also expected to deliver roughly $40 million of additional savings by the end of this year. The company expects to achieve around $140 million of annualized savings and acquisition integration synergies by first-quarter 2023.

A Few Headwinds

The company faces headwinds from higher raw material, logistics and supply-chain costs as witnessed in the third 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 fourth quarter. Higher costs, especially in Europe, are likely to remain a headwind in the fourth quarter. Volatility in natural gas prices in Europe is a concern. As such, higher raw material costs may impact margins.

Semiconductor shortages have also caused a slowdown in automotive production rates globally. The impacts of the chip shortage are likely to continue over the near term, leading to softer demand in automotive. Demand weakness in Europe is also expected to affect volumes in the fourth quarter. Demand in China is also being impacted by the economic slowdown resulting from pandemic-led restrictions.

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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 Olympic Steel, Inc. ZEUS, Commercial Metals Company CMC and Nucor Corporation NUE.

Olympic Steel currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 1.5% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Olympic Steel’s earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 25.4%, on average. ZEUS has rallied around 71% in a year.

Commercial Metals currently carries a Zacks Rank #1. The consensus estimate for CMC's current-year earnings has been revised 19.4% upward in the past 60 days.

Commercial Metals’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 16.7%, on average. CMC has gained around 52% in a year.

Nucor currently carries a Zacks Rank #1. The company has a projected earnings growth rate of 21.5% for the current year.

Nucor’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 3.9%, on average.  NUE has rallied roughly 45% in a year.

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Nucor Corporation (NUE) : Free Stock Analysis Report

Commercial Metals Company (CMC) : Free Stock Analysis Report

Huntsman Corporation (HUN) : Free Stock Analysis Report

Olympic Steel, Inc. (ZEUS) : Free Stock Analysis Report

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