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On Tuesday, BofA Securities adjusted its stance on Huntsman Corporation (NYSE:HUN), moving from a Buy rating to Neutral. Alongside the downgrade, the firm also reduced its price target for the company’s shares to $15.00, a significant decrease from the previous target of $22.00. This change reflects a revised outlook on the company’s financial prospects. According to InvestingPro data, the stock appears undervalued at its current price of $13.72, despite falling nearly 40% over the past six months. The stock has shown recent signs of recovery, posting a 12% gain in the past week.
The downgrade was prompted by a reevaluation of Huntsman’s potential earnings recovery. BofA Securities analyst Matt DeYoe noted that they have significantly rolled back their earnings recovery expectations, which underpinned their prior thesis. The estimated EBITDA growth rates for 2025 and 2026 have been adjusted to 5% and 17% respectively, a sharp decline from the earlier forecasts of 19% and 37%. This reduction translates to a total two-year expansion of only 23%, down from an initially expected 63%. InvestingPro data shows that six analysts have recently revised their earnings expectations downward, though the company is still expected to return to profitability this year.
A crucial factor influencing the downgrade is Huntsman’s substantial exposure to cyclical end-markets. These include sectors like construction, which is estimated to drive a significant portion of Huntsman’s sales both directly and indirectly, as well as automotive and apparel. According to the analyst, these markets limit the company’s volume growth and margin expansion.
Additionally, the firm’s projections indicate that Huntsman’s free cash flow, after accounting for minority interest dividends, will not be sufficient to cover its approximately $175 million dividend. BofA Securities anticipates a projected deficit of $60 million for the years 2025 to 2026. It’s worth noting that Huntsman has maintained dividend payments for 19 consecutive years and currently offers a significant 7.29% dividend yield, though its sustainability is now being questioned. For deeper insights into Huntsman’s financial health and more exclusive ProTips, investors can access the comprehensive research report available on InvestingPro.
The revised price target and rating downgrade reflect BofA Securities’ updated expectations for Huntsman, taking into account the anticipated challenges in the company’s key markets and the impact these may have on its financial performance.
In other recent news, Huntsman Corporation reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of -$0.25, which was below the forecasted -$0.09. Despite the EPS miss, the company’s revenue matched forecasts at $1.45 billion. Fitch Ratings downgraded Huntsman Corporation’s Long-Term Issuer Default Ratings to ’BBB-’ from ’BBB’, citing a decline in profitability and delays in realizing benefits from capital investments. Nevertheless, Fitch maintained a stable outlook, projecting gradual improvement in EBITDA leverage by 2027. Huntsman declared a quarterly cash dividend of $0.25 per share, payable on March 31, 2025, and scheduled its annual stockholders’ meeting for April 30, 2025. The company is actively pursuing strategic restructuring and cost-saving measures, particularly in Europe, to streamline operations and reduce costs. Analysts, including those from Fitch, noted Huntsman’s efforts to maintain solid financial flexibility, supported by a liquidity position of approximately $1.7 billion as of December 31, 2024. These developments reflect Huntsman’s ongoing strategic adjustments and financial maneuvers amid challenging market conditions.
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