Huntsman Corporation (HUN) in Salt Lake City, Utah, is a global manufacturer and marketer of specialty and differentiated chemicals. The company operates through four segments: Polyurethanes; Performance Products; Advanced Materials; and Textile Effects.
HUN's dividend pay-outs have grown at a 7.7% CAGR over the past five years and 3.7% over the past three years. While its four-year average dividend yield is 2.7%, its current dividend translates to a 2.2% yield. It declared a $0.21 per share quarterly dividend on Feb.14, 2022, payable on March 31, 2022. And the stock has gained 42.1% in price over the past year and 19% over the past three months to close Friday's trading session at $37.91.
In addition, considering the company's robust fundamental strength and favorable analyst price targets based on solid growth attributes, the stock should continue to rally.
Here is what could shape HUN's performance in the near term:
Impressive Growth Prospects
The Street expects HUN's revenues and EPS to rise 5.4% and 12.4%, respectively, year-over-year to $8.91 billion and $3.98 in its fiscal year 2022. In addition, HUN's EPS is expected to rise at an 11.7% CAGR over the next five years. Also, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
Robust Financials
During the fourth quarter, ended Dec. 31, 2021, HUN's revenue increased 38.3% year-over-year to $2.31 billion. Its adjusted EBITDA increased 45.4% year-over-year to $349 million. And the company's net income grew 74.1% from its year-ago value to $597 million, while its EPS grew 77.3% from the prior-year quarter to $2.73.
Discounted Valuation
In terms of forward Non-GAAP P/E, the stock is currently trading at 9.48x, which is 31.7% lower than the 13.88x industry average. Also, its 1.03x forward EV/Sales is 39.5% lower than the 1.70x industry average. And HUN's 1.76x forward Price/Book is 18.6% lower than the 2.16x industry average.
Consensus Rating and Price Target Indicate Potential Upside
Among the 14 Wall Street analysts that rated HUN, 12 rated it Buy, and two rated it Hold. The 12-month median price target of $47.36 indicates a 24.9% potential upside. The price targets range from a low of $38.00 to a high of $67.00.
POWR Ratings Reflect Solid Prospects
HUN has an overall A grade, which equates to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. HUN has an A grade for Value and a B for Quality and Sentiment. The stock's lower-than-industry valuation justifies the Value grade. In addition, HUN's solid earnings are consistent with its Quality grade. Furthermore, favorable analysts' price targets and ratings are in sync with the sentiment grade.
Among the 88 stocks in the A-rated Chemicals industry, HUN is ranked #9.
Beyond what I stated above, we have graded HUN for Growth, Stability, and Momentum. Get all HUN ratings here.
Bottom Line
Despite gaining 42.1% in price over the past year, HUN has more potential to grow as the Chemicals industry continues to make solid progress in the wake of pandemic-led disruptions. In addition, given the consensus estimate of the company's earnings and revenue, we think the stock price should continue to advance, delivering substantial gains to investors. So, we believe it could be wise to bet on the stock now.
Note that HUN is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
How Does Huntsman Corporation (HUN) Stack Up Against its Peers?
HUN has an overall POWR Rating of A, which equates to a Strong Buy rating. Check out these other stocks within the Chemicals industry with A (Strong Buy) ratings: ICL Group Ltd. (ICL), Covestro AG (COVTY), and Kronos Worldwide Inc. (KRO).
HUN shares were trading at $37.34 per share on Monday morning, down $0.57 (-1.50%). Year-to-date, HUN has gained 7.05%, versus a -9.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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