Huntsman Aims High, Exceeds Targets

Huntsman Breaks Out To New Highs 

Huntsman NYSE: HUN is a diversified organic chemicals company with customers in end markets ranging across all verticals and industries. The company has been working hard over the past year or so to reposition itself as a more focused company and those efforts are bearing fruit. The Q4 results reflect not only the benefit from those efforts but also from systemic tailwinds blowing throughout the economy. With economic activity robust at all levels and expected to strengthen in the back half of the year, we’re not surprised to see the company outperforming the Marketbeat.com consensus.

"In 2022, as we outlined at our Investor Day, we expect to grow earnings further, expand adjusted EBITDA margins and deliver improved free cash flow and cost optimization. This year in the second quarter we will complete our Geismar Louisiana, MDI splitter project which will expand our differentiated Polyurethanes business in the Americas, and we will continue to progress our previously announced investments targeting electric vehicle batteries, semi-conductors, and polyurethane catalysts.”

Huntsman Beats With Strength In All Segments 

Huntsman had a robust quarter with sales up 39.2% over last year. The revenue beat the consensus by 600 basis points on strength in all segments but there is a wee bit of bad news. On a segment basis, only 3 of the 4 segments saw volumes increase while all 4 saw their revenue increase under the influence of higher prices. The one segment to see volume decline is the Textile segment and that is one the company is looking at possibly divesting. Other than that, Polyurethane, Performance Products, and Advanced Materials grew by 35%, 55%, and 43%. Textile grew by only 13% and was offset by a 7% decline in volume. 

Moving down, the company was able to produce some margin strength as well, aided by pricing increases, and beat on the bottom line. The GAAP EPS of $2.73 is up from $1.54 last year while the adjusted EPS of $0.95 is up $0.44 from last year and beat by a nickel. There was no formal guidance given but we are expecting to see the company’s strength continue into fiscal 2022. The analysts are projecting revenue and earnings growth of 2.3% and 7% respectively which is expecting margin expansion and we believe is underestimating company strength. Revenue has been building on a sequential basis for the last 6 or 8 quarters which puts full-year 2022 results near $9.25 billion or 700 basis points above consensus. 

The analysts themselves have been silent in the wake of the report but we expect that to change. Until then, they are bullish on the stock and have been raising their price targets over the past year. The Marketbeat.com consensus estimate hasn’t budged in the last 30 days but it is up 64% in the last year and we think moving higher. At $42.36 the consensus is projecting about 7.25% of upside with the high price target adding another 40% to that. It was set by Stifel Nicolaus after the Q3 report came in strong. 

The Technical Outlook: Huntsman Sets New All-Time High

Shares of Huntsman are up more than 7.5% in the wake of the Q4 report and look like they will go higher. The move has the stock confirming the uptrend and trading at a new all-time high so we are expecting to see new money flooding into the market. Until then, we think the stock may consolidate at the new highs before moving higher, and it pays 2.3% in dividend yield while trading at only 11X its earnings outlook.