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Why You Should Retain Huntsman (HUN) Stock in Your Portfolio
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Huntsman Corporation (HUN - Free Report) should gain from its investment in downstream businesses and differentiated product innovation as well as strategic acquisitions amid headwinds from demand weakness due to the ongoing global economic crisis.
The company’s shares are up 0.4% over a year, compared with the 13% decline of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Working in HUN’s Favor?
Huntsman remains committed to grow its downstream specialty and formulation businesses and is shifting its MDI (methylene diphenyl diisocyanate) business from components to differentiated systems that typically have higher margins and lower volatility.
The core Polyurethanes segment, which accounted for more than half of its revenues last year, is poised for strong upside in the long term on the back of the company's focus on beefing up its high-value differentiated downstream portfolio. Substitution of MDI for less effective materials will remain a key driving factor for the MDI business. The company has expanded its global MDI capacity by 370,000 kilotons since 2009 and accelerated downstream growth with construction of five downstream facilities. It is also constructing an MDI splitter in Geismar, LA that will also support downstream growth.
Huntsman should also gain from synergies of strategic acquisitions. The buyout of Demilec, a leading manufacturer and distributor of spray polyurethane foam ("SPF") insulation systems in North America, is expected to offer significant synergies.
Moreover, the acquisition of Icynene-Lapolla, a leading North American manufacturer and distributor of SPF, is in line with Huntsman’s strategy of expanding its downstream polyurethanes business. The combination of Icynene-Lapolla with Demilec is expected to create the world's leading supplier of spray foam products. Huntsman expects the integrated business to deliver annualized synergies of around $15 million by the end of 2021.
The company also recently completed the acquisition of CVC Thermoset Specialties, a North American specialty chemical producer that serves industrial composites, adhesives and coatings markets. The buyout is in sync with the company’s strategy of expanding its specialty Advanced Materials portfolio. Huntsman anticipates the acquisition to deliver roughly $15 million of annualized synergies within two years.
A Few Headwinds
Huntsman is seeing soft demand in certain markets such as automotive and construction amid the coronavirus-induced global economic weakness. The company is witnessing lower orders in automotive across North America and Europe. The company expects a significant decline in volumes in Polyurethanes the second quarter of 2020 due to the global economic slowdown. Also, margins in component MDI and polymeric systems are expected to remain under pressure in the second quarter due to soft demand.
The company’s Advanced Materials unit is also exposed to headwind from weaker demand in industrial markets. It expects coronavirus to materially impact several core markets in this segment through the balance of the year. Volumes in this segment are expected to remain under pressure in the second quarter.
Moreover, the company’s Performance Products unit is facing challenges from lower volumes in ethyleneamines. Huntsman expects this segment to be affected by a material slowdown in the world economy and envisions a significant decline in volumes in the second quarter. Weaker conditions are expected to affect its businesses in North America and Europe in this segment.
Better-ranked stocks worth considering in the basic materials space are Agnico Eagle Mines Limited (AEM - Free Report) , The Scotts Miracle-Gro Company (SMG - Free Report) and Barrick Gold Corporation (GOLD - Free Report) .
Agnico Eagle has a projected earnings growth rate of 75.3% for the current year. The company’s shares have rallied roughly 42% in a year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Scotts Miracle-Gro has an expected earnings growth rate of 17.7% for the current fiscal year. The company’s shares have gained roughly 56% in the past year. It currently carries a Zacks Rank #2 (Buy).
Barrick Gold has a projected earnings growth rate of 64.7% for the current year. The company’s shares have surged around 83% in a year. It currently has a Zacks Rank #2.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
Image: Bigstock
Why You Should Retain Huntsman (HUN) Stock in Your Portfolio
Huntsman Corporation (HUN - Free Report) should gain from its investment in downstream businesses and differentiated product innovation as well as strategic acquisitions amid headwinds from demand weakness due to the ongoing global economic crisis.
The company’s shares are up 0.4% over a year, compared with the 13% decline of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Working in HUN’s Favor?
Huntsman remains committed to grow its downstream specialty and formulation businesses and is shifting its MDI (methylene diphenyl diisocyanate) business from components to differentiated systems that typically have higher margins and lower volatility.
The core Polyurethanes segment, which accounted for more than half of its revenues last year, is poised for strong upside in the long term on the back of the company's focus on beefing up its high-value differentiated downstream portfolio. Substitution of MDI for less effective materials will remain a key driving factor for the MDI business. The company has expanded its global MDI capacity by 370,000 kilotons since 2009 and accelerated downstream growth with construction of five downstream facilities. It is also constructing an MDI splitter in Geismar, LA that will also support downstream growth.
Huntsman should also gain from synergies of strategic acquisitions. The buyout of Demilec, a leading manufacturer and distributor of spray polyurethane foam ("SPF") insulation systems in North America, is expected to offer significant synergies.
Moreover, the acquisition of Icynene-Lapolla, a leading North American manufacturer and distributor of SPF, is in line with Huntsman’s strategy of expanding its downstream polyurethanes business. The combination of Icynene-Lapolla with Demilec is expected to create the world's leading supplier of spray foam products. Huntsman expects the integrated business to deliver annualized synergies of around $15 million by the end of 2021.
The company also recently completed the acquisition of CVC Thermoset Specialties, a North American specialty chemical producer that serves industrial composites, adhesives and coatings markets. The buyout is in sync with the company’s strategy of expanding its specialty Advanced Materials portfolio. Huntsman anticipates the acquisition to deliver roughly $15 million of annualized synergies within two years.
A Few Headwinds
Huntsman is seeing soft demand in certain markets such as automotive and construction amid the coronavirus-induced global economic weakness. The company is witnessing lower orders in automotive across North America and Europe. The company expects a significant decline in volumes in Polyurethanes the second quarter of 2020 due to the global economic slowdown. Also, margins in component MDI and polymeric systems are expected to remain under pressure in the second quarter due to soft demand.
The company’s Advanced Materials unit is also exposed to headwind from weaker demand in industrial markets. It expects coronavirus to materially impact several core markets in this segment through the balance of the year. Volumes in this segment are expected to remain under pressure in the second quarter.
Moreover, the company’s Performance Products unit is facing challenges from lower volumes in ethyleneamines. Huntsman expects this segment to be affected by a material slowdown in the world economy and envisions a significant decline in volumes in the second quarter. Weaker conditions are expected to affect its businesses in North America and Europe in this segment.
Huntsman Corporation Price and Consensus
Huntsman Corporation price-consensus-chart | Huntsman Corporation Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space are Agnico Eagle Mines Limited (AEM - Free Report) , The Scotts Miracle-Gro Company (SMG - Free Report) and Barrick Gold Corporation (GOLD - Free Report) .
Agnico Eagle has a projected earnings growth rate of 75.3% for the current year. The company’s shares have rallied roughly 42% in a year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Scotts Miracle-Gro has an expected earnings growth rate of 17.7% for the current fiscal year. The company’s shares have gained roughly 56% in the past year. It currently carries a Zacks Rank #2 (Buy).
Barrick Gold has a projected earnings growth rate of 64.7% for the current year. The company’s shares have surged around 83% in a year. It currently has a Zacks Rank #2.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
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