On Wednesday, Seaport Global Securities maintained a Neutral rating on shares of Huntsman Corporation (NYSE:HUN), a global manufacturer of differentiated and specialty chemicals. The firm's stance comes in light of Huntsman's third quarter performance, which fell short of expectations due to sluggish macroeconomic demand and a forecast that does not show signs of improvement before the year's end.
According to Seaport Global Securities, all three of Huntsman's segments recorded EBITDA below their model predictions for the quarter. The lower corporate incentive compensation provided a slight offset to these results. Looking ahead, the fourth quarter is anticipated to be seasonally slower, and projections for the start of 2025 have been moderated to align with the company's guidance.
Huntsman's financial performance is closely tied to the demand from North American housing and the Chinese market. Seaport Global Securities noted that interest rate cuts and economic stimulus could potentially improve demand, pricing, and margins for Huntsman.
However, the timing of such improvements is uncertain. Despite this, the firm suggests that patient, value-oriented investors might find the current stock price in the low $20 range an attractive entry point, anticipating a recovery in construction, industrial, and automotive demand.
The company has also announced additional cost-saving measures totaling $50 million, predominantly in Europe. This is in addition to the $280 million in restructuring savings already realized by Huntsman, which Seaport Global Securities views as a positive indicator for the company's long-term earnings potential.
Lastly, Seaport Global Securities highlighted Huntsman's balance sheet leverage, which stands at 4.0x net debt/EBITDA. The firm expects this ratio to fall below 3x during 2025 as EBITDA improves, potentially paving the way for share repurchases or bolt-on acquisitions. Despite the ongoing macroeconomic uncertainty, Seaport Global Securities believes that the fundamentals are set for better earnings in 2025 for Huntsman.
In other recent news, Huntsman Corporation has made notable strides in its financial performance and strategic initiatives. The company recently priced $350 million senior notes due in 2034, a move aimed at managing its capital and liabilities. The proceeds from this offering are planned for general corporate purposes, including debt repayment.
Huntsman's recent Q2 2024 earnings report showed an adjusted EBITDA of $131 million, slightly above the Bloomberg consensus estimate. This was accompanied by a volume increase of 9% year-over-year and 8% quarter-over-quarter, leading to improved margins. Despite these advances, the company's advanced materials business faces a negative price mix due to changes in the product mix.
The company has also been the subject of analyst attention. Both Deutsche Bank (ETR:DBKGn) and Goldman Sachs have revised their price targets for Huntsman's shares to $23.00, with Deutsche Bank maintaining a 'Hold' position and Goldman Sachs a 'Sell' position. Deutsche Bank's analysis suggests that Huntsman's earnings growth will depend on economic growth in China, some growth in Europe, and a recovery in the U.S. housing market.
In terms of strategic moves, Huntsman Corporation is actively considering mergers and acquisitions for both vertical and horizontal integration. The company is also committed to maintaining a focus on cash discipline, limiting discretionary spending, and preserving a robust balance sheet. These are the latest developments for Huntsman Corporation.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Huntsman Corporation's current financial position and market performance. The company's market capitalization stands at $3.59 billion, reflecting its significant presence in the specialty chemicals industry.
Despite the challenging macroeconomic environment noted in the article, Huntsman has maintained a consistent dividend policy, having raised its dividend for 3 consecutive years and maintained payments for 18 years straight. This commitment to shareholder returns is further emphasized by the current dividend yield of 4.82%, which may be attractive to income-focused investors.
InvestingPro Tips suggest that while Huntsman's net income is expected to grow this year, the company was not profitable over the last twelve months. This aligns with the article's discussion of the company's recent performance challenges and the anticipated recovery in 2025. The stock's current trading near its 52-week low, coupled with an RSI indicating oversold territory, may support Seaport Global Securities' view that the current price could be an attractive entry point for patient investors.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Huntsman Corporation, providing a deeper dive into the company's financial health and market position.
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