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Huntsman (HUN) Up 27% in 6 Months: What's Behind the Rally?

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Shares of Huntsman Corporation (HUN - Free Report) soared roughly 27% over the last six months. The company has also outperformed the industry’s gain of around 17% over this same time frame.



Huntsman, a Zacks Rank #1 (Strong Buy) stock, has a market cap of roughly $8.2 billion and average volume of shares traded in the last three months is around 3,934.8K. The company has an expected long-term earnings per share growth of around 8%.

What’s Driving HUN?

Huntsman’s efforts to expand its differentiated and specialty businesses, debt repayments and focus on free cash flow generation have contributed to a rally in its shares.    

In October 2017, Huntsman stated 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.

Last month, Huntsman completed the 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, the company will not have any senior secured term loans remaining outstanding under its senior credit facilities. Its annual cash interest expense is estimated to reduce by roughly $20 million, incremental to the previously reported annualized interest savings achieved this year of roughly $70 million resulting from prior debt repayments.

According to Huntsman, the monetization of Venator along 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

Some other top-ranked stocks in the basic materials space are Methanex Corp. (MEOH - Free Report) , ArcelorMittal (MT - Free Report) and Kronos Worldwide Inc. (KRO - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has an expected long-term earnings growth rate of 15%. Its shares have soared 30.3% over a year.

ArcelorMittal has an expected long-term earnings growth rate of 13.4%. Its shares rallied 49.1% over a year.

Kronos has an expected long-term earnings growth rate of 5%. Its shares have surged a whopping 120% in a year’s time.

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