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Here's Why You Should Hold Onto Huntsman (HUN) Stock For Now
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Huntsman Corporation (HUN - 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 3.8% over the past year, compared with a 5.4% decline of its industry.
Image Source: Zacks Investment Research
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 committed to its cost realignment and synergy objectives. It realized more than $280 million in run rate savings at the end of 2023. It sees additional cost-improvement opportunities in 2024 with a focus on manufacturing cost efficiency and the completion of European restructuring activities. It expects roughly $60 million of in-year cost optimization benefits, excluding inflation, in 2024.
HUN is also focused on expanding its margins and delivering incremental returns to shareholders. It repurchased around 2.1 million shares for roughly $50 million in the fourth quarter of 2023. HUN bought back shares worth $350 million during full-year 2023. Its board approved a 5% increase to its quarterly dividend.
Weak Pricing, Soft Demand Ail
The company faces challenges from demand softness as witnessed in 2023. Demand conditions in Europe weakened 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 first quarter of 2024. Soft demand in the Americas is also affecting polyurethanes volumes. The sluggishness in construction is expected to hurt volumes. Weaker demand in infrastructure coatings and industrial markets is also expected to continue to impact volumes in the Advanced Materials unit.
Huntsman is also exposed to headwinds from pricing pressure. Lower selling prices across its segments weighed on its results in the fourth quarter. Competitive pricing is affecting the Performance Products segment. Weaker prices are likely to continue to impact margins in the first quarter.
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Denison Mines Corp. (DNN - Free Report) and Innospec Inc. (IOSP - Free Report) .
The Zacks Consensus Estimate for Carpenter Technology’s current fiscal year earnings is pegged at $3.94, indicating a year-over-year surge of 245.6%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company’s shares have gained around 85% in the past year. CRS currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Denison Mines carries a Zacks Rank #1. DNN beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 300%. The company’s shares have soared roughly 106% in the past year.
The consensus estimate for Innospec’s current-year earnings is pegged at $6.72 per share, indicating a 10.3% year-over-year rise. IOSP, carrying a Zacks Rank #2 (Buy), beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 10.5%. The company’s shares have gained 18% in the past year.
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Here's Why You Should Hold Onto Huntsman (HUN) Stock For Now
Huntsman Corporation (HUN - 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 3.8% over the past year, compared with a 5.4% decline of its industry.
Image Source: Zacks Investment Research
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 committed to its cost realignment and synergy objectives. It realized more than $280 million in run rate savings at the end of 2023. It sees additional cost-improvement opportunities in 2024 with a focus on manufacturing cost efficiency and the completion of European restructuring activities. It expects roughly $60 million of in-year cost optimization benefits, excluding inflation, in 2024.
HUN is also focused on expanding its margins and delivering incremental returns to shareholders. It repurchased around 2.1 million shares for roughly $50 million in the fourth quarter of 2023. HUN bought back shares worth $350 million during full-year 2023. Its board approved a 5% increase to its quarterly dividend.
Weak Pricing, Soft Demand Ail
The company faces challenges from demand softness as witnessed in 2023. Demand conditions in Europe weakened 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 first quarter of 2024. Soft demand in the Americas is also affecting polyurethanes volumes. The sluggishness in construction is expected to hurt volumes. Weaker demand in infrastructure coatings and industrial markets is also expected to continue to impact volumes in the Advanced Materials unit.
Huntsman is also exposed to headwinds from pricing pressure. Lower selling prices across its segments weighed on its results in the fourth quarter. Competitive pricing is affecting the Performance Products segment. Weaker prices are likely to continue to impact margins in the first quarter.
Huntsman Corporation Price and Consensus
Huntsman Corporation price-consensus-chart | Huntsman Corporation Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Denison Mines Corp. (DNN - Free Report) and Innospec Inc. (IOSP - Free Report) .
The Zacks Consensus Estimate for Carpenter Technology’s current fiscal year earnings is pegged at $3.94, indicating a year-over-year surge of 245.6%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company’s shares have gained around 85% in the past year. CRS currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Denison Mines carries a Zacks Rank #1. DNN beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 300%. The company’s shares have soared roughly 106% in the past year.
The consensus estimate for Innospec’s current-year earnings is pegged at $6.72 per share, indicating a 10.3% year-over-year rise. IOSP, carrying a Zacks Rank #2 (Buy), beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 10.5%. The company’s shares have gained 18% in the past year.