Huntsman Corporation’s (HUN - Free Report) stock looks promising at the moment. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let’s delve deeper into the factors that make this chemical maker an attractive investment option.
What's Working in Favor of HUN?
Solid Zacks Rank & Score: Huntsman currently sports a Zacks Rank #1 (Strong Buy) and also has a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores. Such a score allow investors to eliminate the negative aspects of stocks and select winners.
An Outperformer: Huntsman has outperformed the industry it belongs to in a year’s time. The company’s shares have rallied around 72% over this period, compared with roughly 28% gain recorded by the industry. We believe that Huntsman’s efforts to generate free cash flows, reduce debt and invest in differentiated and specialty business bodes well and should drive the stock higher.
Positive Earnings Surprise History: Huntsman has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 32.7%.
Estimates Northbound: Annual estimates for Huntsman have moved north over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2017 has increased by around 2% to $2.66 per share. The Zacks Consensus Estimate for 2018 has also moved up roughly 16% over the same timeframe to $2.49.
Growth Drivers in Place: Huntsman, during third-quarter earnings call, said that despite the termination of its merger of equals deal with Clariant, the company’s business continues to improve across the board. The company remains focused on expanding its margins, generating strong free cash flow and growing its downstream differentiated and specialty businesses.
The company, last month, completed its secondary public offering of Venator, receiving net proceeds of roughly $471 million. The company will use the proceeds along with cash in hand to fully repay the remaining $511 million on its Term Loan B due 2023.
Notably, Huntsman will not have any senior secured term loans remaining outstanding under its senior credit facilities. The company’s annual cash interest expense is estimated to reduce by roughly $20 million, incremental to the previously reported annualized interest savings achieved for 2017 of roughly $70 million resulting from prior debt repayments.
According to Huntsman, the monetization of Venator together with free cash flow alone will have repaid debt of roughly $2.1 billion in 2017 and in excess of $2.6 billion since the start of 2016. The company remains focused on generating free cash flow of $400-$600 million per year and is yet to monetize the balance interest in Venator of roughly 55%.
Other Stocks to Consider
Other top-ranked companies in the basic materials space include Kronos Worldwide, Inc. (KRO - Free Report) , Air Products and Chemicals, Inc. (APD - Free Report) and Koppers Holdings Inc. (KOP - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kronos has expected long-term earnings growth of 5%. Its shares are up roughly 114% over a year.
Air Products has expected long-term earnings growth of 14.1%. Its shares are up roughly 17% over a year.
Koppers has expected long-term earnings growth of 18%. The stock has gained around 21% over a year.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
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