Here's Why You Should Keep Huntsman (HUN) in Your Portfolio
Zacks Investment Research | Sep 03, 2021 05:54AM ET
Huntsman (NYSE:HUN) Corporation industry .
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Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
h3 What’s Aiding HUN?/h3Huntsman 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 positioned for strong upside in the long term on the back of the company’s 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.
Huntsman should also gain from significant synergies of acquisitions. Its strong liquidity and balance sheet leverage gives it adequate flexibility to continue to develop and expand its core businesses through acquisitions and internal investments.
The company expects to deliver more than $120 million of annualized savings and acquisition integration synergies by mid-2023. It achieved $27 million of targeted annualized savings in 2020.
Huntsman remains on track with the integration of CVC Thermoset and Gabriel Performance Products acquisitions. It expects these acquisitions to deliver run-rate synergies of roughly $23 million by early 2023.
h3 A Few Headwinds/h3The company faces headwind from a spike in raw material and logistical costs as witnessed in the most recent quarter. Supply disruptions have led to a rise in raw material costs. Huntsman expects unfavorable impacts from higher costs of raw materials, especially benzene, in the third quarter. As such, higher raw material costs may impact margins in the third quarter.
Huntsman’s Advanced Materials unit is still exposed to headwind from weaker demand in aerospace markets. The pandemic is still impacting international travel. Sales in the company’s aerospace business were flat year over year in the second quarter of 2021. Despite some recovery, weakness in aerospace is expected to continue in the third quarter.
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