Huntsman Corporation (HUN Quick QuoteHUN - Free Report) is expected to gain from its investment in downstream businesses and differentiated product innovation as well as strategic acquisitions amid headwinds from demand weakness and pricing pressure.

The company’s shares are down 26% over the past year, compared with the 17.4% 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.

Downstream Expansion & Cost Synergies Aid HUN

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. The substitution of MDI for less effective materials will remain a key driving factor for the MDI business.
 
Huntsman should also gain from significant synergies of acquisitions. Its strong liquidity and balance sheet leverage give 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.

The company remains on track with its cost realignment and synergy plans, which includes a $280 million cost realignment and a European restructuring program. HUN is also focused on expanding its margins and delivering incremental returns to shareholders. It repurchased approximately 3.8 million shares for roughly $101 million in the third quarter of 2023.

Weak Pricing, Soft Demand Ail

The company faces challenges from demand softness. Demand conditions in Europe deteriorated due to high levels of natural gas prices. Demand in China is also being impacted by reduced economic growth resulting from the pandemic-led restrictions and lower construction activities.

While demand conditions have improved somewhat of late in these regions, the lingering impacts of lower year-over-year demand are likely to weigh on volumes in the fourth quarter of 2023. Soft demand in the Americas is also impacting polyurethanes volumes. Weaker demand in infrastructure coatings and industrial adhesives markets is also expected to continue to impact volumes in Advanced Materials.

Huntsman is also exposed to headwinds from pricing pressure. Lower selling prices across Polyurethanes and Performance Products segments weighed on its results in the third quarter. Competitive pricing is affecting both segments. Weaker prices are likely to continue to impact these segments in the fourth quarter.

Stocks to Consider

Better-ranked stocks worth a look in the basic materials space include, Cameco Corporation (CCJ Quick QuoteCCJ - Free Report) , Carpenter Technology Corporation (CRS Quick QuoteCRS - Free Report) and The Andersons Inc. (ANDE Quick QuoteANDE - Free Report) .

Cameco has a projected earnings growth rate of 188% for the current year. The Zacks Consensus Estimate for CCJ’s current-year earnings has been revised upward by 12.5% over the past 60 days.  The stock has shot up around 71% in a year. CCJ currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Carpenter Technology’s current fiscal year earnings is pegged at $3.97, indicating a year-over-year surge of 248.3%. CRS, carrying a Zacks Rank #1, beat the Zacks Consensus Estimate in all of the last four quarters, with the average earnings surprise being 14.3%. The company’s shares have rallied 57% in the past year.

Andersons currently carries a Zacks Rank #1. ANDE beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 64.4%, on average. The company’s shares have rallied 47% in the past year.