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Bull of the Day: Huntsman (HUN)

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Huntsman (HUN - Free Report) is a Zacks Rank #1 (Strong Buy) that is a leading manufacturer of differentiated and commodity chemical products. Its products include MDI, polyols, propylene oxide, amines, surfactants, maleic anhydride, epoxy-based polymer formulations, textile chemicals and dyes.

The stock has been slumping over the last few months along with the overall market. However, a recent earnings beat has helped analyst estimates higher. Additionally, the stock is holding technical support. so investors should be watching current levels closely.

More about HUN

The company was founded in 1970 and is headquartered in The Woodlands, Texas. Huntsman employs over 9,000 and has a market cap of $7 billion.

The stock has a Forward PE of 8, making it a value play. HUN has a Zacks Style Scores of “A” in Value and Momentum, but “C” in Growth. The stock also pays a dividend of 2.5%.

Huntsman operates through four segments: Polyurethanes, Performance Products, Advanced Materials, and Textile Effects. Their products are used in number of applications including aerospace, automotive, construction products, adhesives, personal care and hygiene, durable and nondurable consumer products, digital inks, electronics, medical, packaging, coatings and construction, power generation, refining and textile chemicals.

Earnings Beat

HUN reported earnings last week, seeing a 19% EPS surprise to the upside. The company saw revenues come in above expectations and sees a strong Q2. On earnings slides the company showed Q2 EBITDA at $380-420 million and EBITDA margins at 16-17%. Huntsman affirmed FY22 guidance and guided FY22 capex at $300 million.

Management commented on the call that the balance sheet strength and cash flow  flexibility allows them to invest for the future, as well as return cash to shareholders. For that reason, they increase the dividend 13% in the first quarter, which has been increased 70% from 2018.

Huntsman Corporation Price and EPS Surprise

Huntsman Corporation Price and EPS Surprise

Huntsman Corporation price-eps-surprise | Huntsman Corporation Quote

Estimates Rising

The strong quarter has given analysts reason to lift estimates. Over the last 7 days, estimates have ticked 7% higher for the current quarter, going from $0.99 to $1.06. For the current year, estimates have gone up 5% over that same time frame.

Valuation is being cited as a reason for being long the stock and after earnings, we saw a couple reiterations to buy the stock.

One of the biggest bulls is Stifel, who has a Buy rating and a $67 price target. Jefferies has the stock at a Buy with a $49 target. Wells Fargo kept HUN with an Overweight rating, but dropped their price target to $42 from $50.

The Technical Take

HUN broke out late last year, moving from $28 to $41 in just a couple months. The stock has pulled back over 20% since that 2022 high and has fallen to technical support.

Over the last few weeks, the stock has been dancing with the 200-day moving average at $32. After the stock gapped higher on earnings, it was sold back down to that level and buyers stepped in.

In addition to the 200-day, the 61.8% retracement from the 2021 lows to 2022 highs is the $30.70 area. As long as the bulls hold these levels, they are still in control of the stock. Areas of resistance to the upside are $35 and $37, which is the 50-day moving average.  

In Summary

Huntsman is in a good position to weather the market storm that has hit equities in 2022. While the stock is off 20% from highs, current levels are attractive based on valuation levels. Additionally, the stock is holding technical support and due for an oversold bounce.

Traders looking for a trade to highs can lean against that support and look for the 50-day MA. For investors, its time to start nibbling here longer-term and look at the stock as a long-term value play.

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