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Huntsman (HUN) Up 22% in a Year: What's Behind the Rally?

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Shares of Huntsman Corporation (HUN - Free Report) have popped around 22% over the past year. The company has also outperformed its industry's growth of roughly 9% over the same time frame.  

Huntsman, a Zacks Rank #1 (Strong Buy) stock, has a market cap of roughly $7.7 billion and average volume of shares traded in the last three months is around 2,241K. The company has expected long-term earnings per share growth of 8.5%.

Let's take a look into the factors that are driving this chemical maker.


What’s Driving HUN?

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. The company topped earnings and revenues estimates in the second quarter, driven by strong performance across its businesses.

Huntsman’s second-quarter profits shot up more than three-fold year over year to $623 million or $1.71 per share. Adjusted earnings of $1.01 per share for the quarter trounced the Zacks Consensus Estimate of 87 cents. Revenues went up around 17% year over year to $2,404 million, also exceeding the Zacks Consensus Estimate of $2,276 million.

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%.

Huntsman, during 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.

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.

Per 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.

Huntsman Corporation Price and Consensus


Huntsman Corporation Price and Consensus | Huntsman Corporation Quote

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Celanese Corporation (CE - Free Report) , Ingevity Corporation (NGVT - Free Report) and Air Products and Chemicals, Inc. (APD - Free Report) .

Celanese has an expected long-term earnings growth rate of 10% and a Zacks Rank #1. The company’s shares have gained around 24% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has an expected long-term earnings growth rate of 12% and a Zacks Rank #1. The company’s shares have rallied around 60% in a year.

Air Products has an expected long-term earnings growth rate of 16.2% and carries a Zacks Rank #2 (Buy). Its shares have gained roughly 15% over a year.

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