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 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 24.1% over this period, compared with roughly 7.1% rise recorded by the industry. Forecast-topping earnings performance, 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 22.5%.
Healthy Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for Huntsman is currently pegged at $3.52, reflecting an expected year-over-year growth of 41.9%. Moreover, earnings are expected to register a 28.4% growth in third-quarter 2018. The company also has an expected long-term earnings per share growth of 8.5%.
Superior Return on Equity (ROE): Huntsman’s ROE of 24.1%, as compared with the industry average of 9.3%, manifests the company’s efficiency in utilizing shareholder’s funds.
Strong Q2 & Upbeat Prospects: Huntsman saw its profits surge more than three-fold year over year to $623 million or $1.71 per share in second-quarter 2018. Adjusted earnings of $1.01 per share for the quarter topped the Zacks Consensus Estimate of 87 cents.
Revenues went up around 17% year over year to $2,404 million, also beating the Zacks Consensus Estimate of $2,276 million. The results were driven by strong performance across the company's businesses.
Huntsman, in its second-quarter call, stated that growth in its Polyurethanes business continues on the back of good supply and demand fundamentals. The company remains focused on executing opportunities in its downstream businesses while creating shareholder value.
Huntsman remains committed to grow its downstream specialty and formulation businesses. It also remains focused on expanding its margins and generating strong free cash flows. Huntsman generated free cash flow of $174 million during the second quarter, up 13% year over year. The company expects to generate free cash flow of between $550 million and $625 million this year.
Huntsman’s board, in May, also approved an increase in its earlier authorized share repurchase program to up to $1 billion. The company noted that the buybacks will be supported by its free cash flow generation. Huntsman repurchased around 4.6 million shares worth roughly $138 million during the second quarter.
Moreover, Huntsman, earlier this year, acquired Demilec from an affiliate of Sun Capital Partners, Inc., for $350 million. 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 stocks worth considering in the basic materials space include KMG Chemicals, Inc. , Ingevity Corporation (NGVT - Free Report) and Celanese Corporation (CE - Free Report) each carrying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
KMG Chemicals has an expected long-term earnings growth rate of 28.5%. Its shares have gained roughly 37% over a year.
Ingevity has an expected long-term earnings growth rate of 12%. The company’s shares have rallied around 75% in a year.
Celanese has an expected long-term earnings growth rate of 10%. Its shares have shot up roughly 19% over a year.
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