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Huntsman (HUN) Gains on Downstream Expansion, Acquisitions
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Huntsman Corporation (HUN - Free Report) is benefiting from actions to grow its downstream businesses and acquisitions. However, it faces headwinds from demand weakness and input cost inflation.
The company’s shares are down 5.3% over a year, compared with the 10.1% rise of its industry.
Image Source: Zacks Investment Research
Huntsman is expanding 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.
Moreover, HUN should benefit 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.
Huntsman 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.
However, 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.
Huntsman also 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.
Better-ranked stocks worth a look in the basic materials space include L.B. Foster Company (FSTR - Free Report) , Koppers Holdings Inc. (KOP - Free Report) and Linde plc (LIN - Free Report) .
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’s shares have gained around 11% in a year.
Koppers currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for KOP’s current-year earnings has been stable over the past 60 days.
The consensus estimate for current-year earnings for KOP is currently pegged at $4.40, reflecting an expected year-over-year growth of 6.3%. Koppers’ shares have rallied roughly 48% in the past year.
Linde currently carries a Zacks Rank #2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 1% upward in the past 60 days.
Linde beat the 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 popped roughly 33% in the past year.
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Huntsman (HUN) Gains on Downstream Expansion, Acquisitions
Huntsman Corporation (HUN - Free Report) is benefiting from actions to grow its downstream businesses and acquisitions. However, it faces headwinds from demand weakness and input cost inflation.
The company’s shares are down 5.3% over a year, compared with the 10.1% rise of its industry.
Image Source: Zacks Investment Research
Huntsman is expanding 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.
Moreover, HUN should benefit 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.
Huntsman 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.
However, 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.
Huntsman also 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
Zacks Rank & Key Picks
Huntsman currently has a Zacks Rank #3 (Hold).
Better-ranked stocks worth a look in the basic materials space include L.B. Foster Company (FSTR - Free Report) , Koppers Holdings Inc. (KOP - Free Report) and Linde plc (LIN - Free Report) .
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’s shares have gained around 11% in a year.
Koppers currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for KOP’s current-year earnings has been stable over the past 60 days.
The consensus estimate for current-year earnings for KOP is currently pegged at $4.40, reflecting an expected year-over-year growth of 6.3%. Koppers’ shares have rallied roughly 48% in the past year.
Linde currently carries a Zacks Rank #2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 1% upward in the past 60 days.
Linde beat the 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 popped roughly 33% in the past year.