Why you should keep Huntsman (HUN) stock in your portfolio

Huntsman Company HUN may benefit from its investments in downstream companies and diversified product innovations, as well as strategic acquisitions in the face of headwinds from weak demand in certain markets and pricing pressures.

The company’s shares are up 1.5% over the past year compared with the industry’s 6% gain.

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Let’s find out why this Zacks #3 (Hold) stock is worth holding right now.

Downstream expansion and cost synergies HUN Support

Huntsman continues to focus 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 variability.

The company’s polyurethanes segment is well positioned for strong growth over the long term, thanks to its focus on developing a diversified, high-value downstream portfolio. Replacing MDI with less efficient materials will remain a key driver of MDI’s business.

Huntsman should also benefit from significant acquisition synergies. High liquidity and balance sheet leverage provide the necessary flexibility to further develop and expand the core business through acquisitions and internal investments. The acquisitions of CVC Thermoset and Gabriel Performance Products contribute to EBITDA growth in the Advanced Materials segment.

The company remains committed to achieving its cost alignment and synergy goals. At the end of 2023, the company achieved savings of over USD 280 million. It sees additional cost improvement opportunities in 2024, focusing on production cost efficiency and the end of European restructuring actions. In 2024, it expects annual cost optimization benefits to be approximately $60 million, excluding inflation.

Weak prices, soft demand

In 2023, the company faced challenges related to weak demand and significant inventory reduction. Demand conditions in Europe deteriorated last year due to high natural gas prices. Demand in China was impacted by reduced economic growth resulting from pandemic restrictions and lower construction activity.

While demand conditions in these regions have improved recently, as seen in the first quarter of 2024, the continuing effects of weak demand in some markets are likely to continue in the near term. The housing construction market in China remains weak. Weaker activity in the general industrial, infrastructure coatings and commodity markets is expected to continue to impact volumes in HUN’s Advanced Materials segment.

Huntsman is also exposed to the adverse effects of pricing pressure. Lower sales prices in all segments weighed on the company’s first-quarter results. A less favorable supply and demand environment contributed to the decline in MDI prices. Competitive prices also influence the Performance segment. Lower prices are likely to continue to impact HUN’s results in the second quarter.

Huntsman Corporation Price and Consensus

Huntsman Corporation Price Consensus Chart | Quote from Huntsman

Stocks to consider

The better-ranked companies in the basic materials area include, among others: Axalta Coating Systems Ltd. AXTA, Carpentry Technologies Corporation (National Court Register) i ATI company ATi.

Carpenter Technology is currently sporting a Zacks Rank #1 (Strong Buy). CRS has surpassed the Zacks Consensus Estimate in three of the trailing four quarters while matching it once, with an average earnings surprise of 15.1%. The company’s shares are up approximately 150% over the past year. You can see complete list of today’s Zacks #1 ranked stocks here.

A Zacks Rank #1 Axalta Coating Systems has an expected earnings growth rate of 26.8% for the current year. Over the last 60 days, the consensus estimate for AXTA’s current-year earnings has been revised upwards by 5.9%. The company’s shares have gained about 16% over the past year.

ATI is currently a Zacks Rank #1. ATI has topped the Zacks Consensus Estimate in each of the trailing four quarters, with the average earnings surprise coming in at 8.3%. The company’s stock is up about 77% over the past year.

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