Huntsman Corporation - Value
January 05 2012 - 7:00PM
Zacks
Huntsman Corporation (HUN) is trading at just 5.2x forward
estimates even though earnings are expected to grow in the triple
digits in 2011. Shares of this Zacks #2 Rank (buy) plunged over the
summer as investors abandoned the stock. Is it too late in the
cycle to buy the chemical companies?
Huntsman manufactures a variety of chemicals for
the global market, including the plastics, automotive, aviation,
textile, paint and coatings, technology, agriculture, furniture and
health care industries.
Strongest Third Quarter in History
On Nov 2, Huntsman reported its third quarter
results and surprised on the Zacks Consensus by 4.7%. Earnings were
45 cents compared to the consensus of 43 cents. The company made 34
cents in the third quarter of 2010.
Revenue jumped 24% to $3 billion from $2.4 billion
a year ago.
All divisions saw an increase in revenue except for
Textile Effects which saw a decrease due to lower sales volumes
which were only partially offset by higher average selling prices.
There was lower demand. The average selling prices increased due to
the strength of the Swiss Franc against the U.S. dollar.
The company also announced earlier in the third
quarter that it would record a cash restructuring charge of about
$135 million to deal with a restructuring plan to mitigate the
impact of the strong Swiss Franc and the challenging business
conditions of the global textile industry.
Record Year Expected in 2011
As of early November, Huntsman still expected to
post a record 2011 despite "sluggish" global business
conditions.
But, it also expected to see stronger earnings in
the coming year as many of its larger product lines are apparently
still far removed from peak earnings potential.
Double Digit Earnings Growth in 2012?
After triple digit earnings growth in 2010 and
another 104% expected in 2011, Huntsman is expected to slow in
2012.
The 2012 Zacks Consensus has actually fallen to
$1.91 from $1.96 over the last 90 days as 3 estimates moved lower
in the prior month. Still, this is earnings growth of 13% as the
Zacks Consensus is calling for $1.70 in 2011.
Super Cheap Stock
Investors have fled the stock since the summer
downturn.
![](http://www.zacks.com/images/upload_dir/1325790872.jpg)
Huntsman now has very attractive valuations. In
addition to a forward P/E of just 5.2, the company has a
price-to-book of 1.2. A P/B ratio under 3.0 usually indicates
value.
It also has a price-to-sales ratio of just 0.2. A
P/S ratio under 1.0 can mean a company is undervalued.
If an investor is also looking for income, in
addition to value, Huntsman rewards its shareholders with a
dividend currently yielding a juicy 4%.
In the third quarter earnings report Huntsman
sounded upbeat about 2012. It is scheduled to report fourth quarter
results on Feb 16. We'll soon find out whether or not chemical
companies have reached peak earnings in this cycle or if the global
economy is stronger than many realize.
This Week's Value Zacks Rank Buy Stocks
The steel companies are navigating a difficult
market as consumer demand appears to be solid but prices are
declining. Reliance Steel & Aluminum Company (RS) is
still expected to post double digit earnings growth in both 2011
and 2012. This Zacks #1 Rank (strong buy) is also a value stock
with a forward P/E of 10.9. Read the full article.
Not all banks are created equal. Oriental
Financial Group Inc. (OFG) recently raised its dividend by 20%
due to an improving outlook for its Puerto Rico-based business.
This Zacks #1 Rank (strong buy) also has attractive valuations with
a forward P/E of just 8.4. Read the full article.
The transports have momentum to start 2012.
Trinity Industries, Inc. (TRN) is expected to grow earnings
by the double digits as the backlog grew on its railcar and barge
businesses. This Zacks #1 Rank (strong buy) is a double threat in
both growth and value as it has a P/B ratio of just 1.3. Read the
full article.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com. She is also the Editor of the Turnaround Trader and
Insider Trader services. You can follow her on twitter at
traceyryniec.
HUNTSMAN CORP (HUN): Free Stock Analysis Report
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