Huntsman International: A Catalyst For 25%+ Appreciation

Source: 2017 Annual Report

Polyurethanes make up more than 50% of sales, but the end uses across all products are highly diversified with insulation as the top share at only 17%. Huntsman's products are generally industrial, but it also saw 32% of sales from the consumer market in 2017.

Source: 2018 Corporate Overview

In addition to product diversity, Huntsman enjoys regional diversity. One-third of sales are in North America (ex. Mexico), 26.1% in Europe, and 25.8% in Asia Pacific.

Source: May 2018 10-Q

The company reported a 20% earnings surprise on May 1. This was the fourth double-digit surprise in a row, a sign that the executive team has a good handle on the business and is managing expectations well with analysts.

All segments were up year-over-year in Q1, and most saw price and volume increases, pointing to a strong downstream environment.

Source: May 2018 10-Q

Estimates across time have been increasing since the earnings call, and all recommendations suggest investors buy the stock.

Source: finance.yahoo.com

The company has $1.25 billion of dry powder in credit facilities and cash and has been reducing its debt load. Both its Debt/Equity and Cash Flow/Total Debt are the best among its peers. Management has left itself in position to continue to make beneficial acquisitions, as it did earlier this year in polyurethane with spray foam producer Demilec.

(Click on image to enlarge)

Source: finbox.io

The stock currently yields 2.1%, and Huntsman is also one third through its $347 million repurchase authorization. Its Dividend and Interest Coverage ratios are strong.

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Source: finbox.io

Efficiency margins show that Huntsman's management team is performing well. ROE and Return on Invested Capital top their peers and the sector. ROA and Net Profit Margin are strong but have room for improvement as they sit below peer averages.

Source: finbox.io

A closer look at margins shows a positive trend in EBITDA, but the higher slope in Net Profit margins is probably thanks to accounting noise.

(Click on image to enlarge)

Source: finbox.io

Assuming that this expansion has more legs, Huntsman is in position to continue to enjoy growth in the U.S. However, in the case that a recession is closer than expected, the firm has a conservative fiscal footing that would help weather a downturn. Its customer and geographic diversity will also help to dampen any weakness in the U.S., and aid profits while the global economy is strong.

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Disclaimer: As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned. I also have no ...

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