Huntsman Chemicals Corp is a value stock with a twist of momentum, recently jumping to a multi-year high after reporting an impressive 96% earnings surprise. HUN also trades at a discount to its peers, making this Zacks #1 rank stock a compelling value play.
Huntsman Corp manufactures and sells a line of organic and inorganic chemical products worldwide. The company was founded in 1970 and has a market cap of $4.95 billion.
Although Huntsman has trending higher for the last few months, shares got an extra boost on May after the company reported strong Q1 results that came in ahead of expectations.
Revenue for the period was up 28% from last year to $2.7 billion. Earnings looked even better, coming in at 47 cents, 96% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 107% over the last four quarters.
The good quarter was helped by the company's ability to pass along higher input costs to its customers, with demand remaining strong in spite of higher prices. But in spite of that dynamic, Huntsman saw margin growth in 3 of its 5 operating units. The company also noted that its factories are running at a high utilization rate and that it sees continued strength in demand.
One of the few knocks against Huntsman has been its balance sheet, which has provided it with plenty of operating leverage in the strong market. But regardless, its financial position has been on the upswing, with total debt down $119 million from last year to $4.06 billion against cash and short-term investments of $639 million.
We saw some pretty sharp movement in estimates off the good quarter, with the current year adding 24 cents to $1.66 while the next-year estimate gained 20 cents to $2.01, a bullish 21% growth projection.
But in spite of the gains, HUN still has plenty of value, trading with a forward P/E of 12.5%, a nice discount to its peer average of 14.6X. Its PEG Ratio (PE/Growth) of .625 is well below the traditional benchmark of 1 for value.
On the chart, shares jumped into a new multi-year high on the good quarter, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.