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 #2 (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 allows 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 26.8% over this period, compared with roughly 11.6% gain recorded by the industry. Strong fourth-quarter results, efforts to expand specialty businesses and focus on free cash flow generation have contributed to the rally in Huntsman's shares.
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 31.5%.
Superior Return on Equity (ROE): Huntsman’s ROE of 29.3%, as compared with the industry average of 9.5%, manifests the company’s efficiency in utilizing shareholder’s funds.
Healthy Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for Huntsman is currently pegged at $2.80, reflecting an expected year-over-year growth of 12.9%. Moreover, earnings are expected to register a 12.1% growth in 2019. The company also has an expected long-term earnings per share growth of 8.3%.
Growth Drivers in Place: Huntsman, in its fourth-quarter call, noted that it will continue investing in organic growth. The company expects to generate $450-$650 million of free cash flow in the next few years and will also pursue acquisitions that create value, stronger earnings and growth in its downstream business.
Huntsman remains focused on expanding its margins, generating strong free cash flow and growing its downstream specialty and formulation businesses.
Huntsman generated free cash flow of $190 million in the fourth quarter, up around 43% from $133 million a year ago. During 2017, the company repaid debt worth roughly $2.1 billion. Moreover, it had total cash and unused borrowing capacity worth $1,247 million at the end of 2017.
Huntsman also announced a 30% increase in its quarterly dividend from 12.5 cents to 16.25 cents per share. The company’s board also authorized it to repurchase shares worth up to $400 million in addition to the $50 million remaining under its share repurchase authorization obtained in September 2015.
Huntsman, last month, said that it is acquiring Demilec from an affiliate of Sun Capital Partners, Inc., in an all-cash deal worth $350 million that will be funded from its available liquidity. Demilec is a leading manufacturer and distributor of spray polyurethane foam (SPF) insulation systems in North America.
According to Huntsman, integration of Demilec into its Polyurethanes business delivers considerably higher and stable margins along with offering significant synergies by pulling large quantities of upstream polymeric MDI into specialized spray foam systems. The integrated business is likely to have more than 25% EBITDA margins and double-digit growth.
Other Stocks to Consider
Other top-ranked companies in the basic materials space include Kronos Worldwide, Inc. (KRO - Free Report) , Methanex Corporation (MEOH - Free Report) and Eastman Chemical Company (EMN - Free Report) .
Kronos sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 5%. Its shares have rallied roughly 51% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Methanex carries a Zacks Rank #1 and has an expected long-term earnings growth rate of 15%. Its shares have gained around 41% over a year.
Eastman Chemical has an expected long-term earnings growth rate of 8.9% and carries a Zacks Rank #2. Its shares have gained around 35% over a year.
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