Huntsman (HUN) Up 58% in 6 Months: What's Driving the Stock?
Huntsman Corporation’s HUN shares have surged 57.8% over the past six months. The company has also outperformed its industry’s rise of 45.5% to over the same time frame.
Huntsman, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $4.9 billion and average volume of shares traded in the last three months is around 1,765.4K. The company has an expected long-term earnings per share growth rate of 5%.
Let’s delve deeper into the factors behind the stock’s price appreciation.
What’s Going in HUN’s Favor?
Huntsman is benefiting from its investment in downstream businesses and differentiated product innovation. It remains focused on growing 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 company’s Polyurethanes segment is well placed for strong upside in the long term on the back of its focus on ramping up its high-value differentiated downstream portfolio. Substitution of MDI for less effective materials will remain a key driving factor for the MDI business.
Moreover, Huntsman should 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.
The company, in May 2020, also 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, in July, said that the integration of CVC Thermoset Specialties and Icynene-Lapolla buyouts is ahead of its plans. The company expects to achieve total annualized targeted synergies of $35 million for these acquisitions by the end of 2021.
Moreover, the company earlier this month announced updates on its third-quarter 2020 guidance. It expects adjusted EBITDA in the Polyurethanes segment to be at least 40% better compared with previous guidance provided during second-quarter earnings call.
Huntsman noted that the improved outlook reflects continued strength in construction related markets as well as better-than-expected improvement in automotive demand and higher overall margins.
Huntsman Corporation Price and Consensus
Huntsman Corporation price-consensus-chart | Huntsman Corporation Quote
Stocks to Consider
Other top-ranked stocks stocks worth considering in the basic materials space include AngloGold Ashanti Limited AU, Barrick Gold Corporation GOLD and Yamana Gold Inc. AUY.
AngloGold Ashanti has a projected earnings growth rate of 124.2% for the current year. The company’s shares have gained roughly 41% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have rallied around 60% in a year. It currently has a Zacks Rank #1.
Yamana Gold has an expected earnings growth rate of 84.6% for the current year. The company’s shares have surged around 79% in the past year. It currently carries a Zacks Rank #2.
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