7 Reasons To Add Huntsman (HUN) Stock To Your Portfolio Now
Zacks Investment Research | Oct 16, 2017 08:23AM ET
Huntsman Corporation’s (NYSE:HUN) stock looks promising at the moment. The company has seen its shares pop around 54% year to date. 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 company an attractive investment option.
What Makes Huntsman an Attractive Pick?
Solid Rank & VGM Score: Huntsman currently has a Zacks Rank #1 (Strong Buy) and a industry it belongs to over a year. The company’s shares have jumped 87.2% over this period, compared with roughly 35% gain recorded by the industry.
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 26.4%.
Estimates Northbound: Annual estimates for Huntsman have moved north over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2017 has increased by around 2.7% to $2.26 per share. The Zacks Consensus Estimate for 2018 has also moved up 2% over the same timeframe to $2.08.
Superior Return on Equity (ROE): Huntsman’s ROE of 30%, as compared with the industry average of 21%, manifests the company’s efficiency in utilizing shareholder’s funds.
Attractive Valuation: Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, Huntsman is currently trading at trailing 12-month EV/EBITDA multiple of 8.6x, cheaper compared with the industry average of 10.9x.
Growth Drivers in Place: Huntsman expects to attain earnings growth in all business segments in 2017. It also sees results in the third quarter (barring the Pigments and Additives unit that will be reported in discontinued operations) to be better than those in the second.
Huntsman should gain from strong underlying fundamentals and its downstream strategy. Moreover, strength of the company’s global polyurethanes business and sustained recovery of the performance products unit should support its earnings through the balance of 2017. The company also remains committed to cut debt. It has paid down more than $2 billion of debt over the last two years.
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Huntsman and Clariant AG, earlier this year, agreed to combine in an all-stock deal that will create a leading chemical specialty company with revenues of roughly $13.2 billion. This merger of equals will create a formidable industry player that will help the companies grow their foothold in high-growth markets, cut operating costs and expand margins.
The merged entity will be named HuntsmanClariant, where Huntsman’s shareholders will hold 48% interest in the merged entity and the remaining 52% will be owned by Clariant.
The merged entity will leverage shared knowledge in sustainability and joint innovation platform, enabling the development of new products to drive shareholders’ value and deliver superior returns. The combined entity will speed up value creation for shareholders through robust combination of products, technology and talent. This is expected to translate into annual cost synergies of roughly $400 million and generate over $3.5 billion in value creation.
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