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Huntsman (HUN) Up 8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Huntsman (HUN). Shares have added about 8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Huntsman due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Huntsman's Earnings and Revenues Top Estimates in Q1

Huntsman recorded a profit of $708 million or $3.16 per share in first-quarter 2020, up from a profit of $131 million or 51 cents in the year-ago quarter.

Barring one-time items, adjusted earnings per share were 29 cents in the quarter, down from 36 cents in the year-ago quarter. The figure topped the Zacks Consensus Estimate of 19 cents.

Revenues were $1,593 million, down around 5% year over year. However, the top line surpassed the Zacks Consensus Estimate of $1,536.3 million. The company saw lower sales across its business segments in the reported quarter.

Segment Highlights

Polyurethanes: Revenues for the segment fell 4% year over year to $888 million in the reported quarter due to lower MDI (methylene diphenyl diisocyanate) average selling prices and overall polyurethanes sales volumes.

Performance Products: Revenues for the unit declined 3% to $292 million due to reduced average selling prices as well as lower sales volumes.

Advanced Materials: Revenues for the unit dropped 11% to $241 million due to lower average selling prices and sales volumes.

Textile Effects: Revenues for the division were down 5% to $180 million. The decline was due to lower average selling prices that more than offset higher sales volumes.

Financials

Huntsman had total cash of $1,594 million at the end of the quarter, up more than three fold year over year. Long-term debt was $2,049 million, down around 12% year over year.

Net cash used in operating activities was $40 million for the reported quarter.

The company repurchased around 5.4 million shares worth roughly $96 million during the quarter.

Outlook

Moving ahead, Huntsman noted that it remains focused on protecting its balance sheet amid the global economic crisis. The company has reduced unnecessary inventories and is also trimming capital spending this year by 30% or around $90 million by delaying discretionary spending. Huntsman has also taken other actions including cost reductions and suspension of share repurchases. It will also accelerate plans to realize synergies with its recent and pending strategic acquisitions.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -200.97% due to these changes.

VGM Scores

At this time, Huntsman has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Huntsman has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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