Huntsman Corporation - Value

The chemical sector was hot in 2010 as manufacturing picked up worldwide. Can it continue in 2011?

Huntsman Corporation (HUN) grew earnings by over 100% in 2010 and is expected to see double digit earnings growth in 2011. Even though shares have soared, Huntsman is a value play, trading at just 13x forward earnings.

This Zacks #1 Rank (strong buy) 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.

Huntsman Easily Surprised for the Third Quarter

On Nov 4, Huntsman reported its third quarter results and blew by the Zacks Consensus Estimate by 43%, or 9 cents. Earnings per share were 30 cents compared to the consensus of 21 cents. This is much better than the 21 cent loss in the third quarter of 2009.

Revenue rose 16% to $2.4 billion from $2.1 billion in the same quarter last year. It was also up 2% compared to the second quarter of 2010.

The company continued to see recovery in global demand, higher average selling prices and increasing margins for most product lines.

2007 was Huntsman's benchmark for performance, as it was before the financial crisis when the global economy was at full throttle.

In the third quarter, the company beat that benchmark as total sales volume surpassed the volume in the third quarter of 2007, even though it had a different product and geographic profile.

Zacks Consensus Estimates Jump

After the big earnings beat and the upbeat third quarter report, analysts moved to raise 2010 and 2011 estimates.

In 2010, the Zacks Consensus gained 15 cents to 67 cents in the last 2 months. This is earnings growth of 149%.

Big growth is also expected in 2011, with earnings projected to jump another 86%. The 2011 Zacks Consensus Estimate has jumped 25 cents in the last 2 months to $1.25 per share.

Huntsman is scheduled to report fourth quarter results on Feb 18.

Still a Value Stock

Shares have rebounded from the financial crisis lows and are now trading at 2-year highs.

But even with the stock surge, shares still have value.

In addition to the attractive P/E ratio, it also has a price to book of just 2.1. That is well within the value range of under 3.0 and also under its peers like Solutia (SOA) which has a P/B ratio of 4.4 and Albermarle (ALB) which sports a P/B of 3.6.

Its price-to-sales ratio is also a low 0.4, under its peers at 1.1.

With a solid return on equity (ROE) of 11.4%, Huntsman also rewards shareholders with a dividend yielding 2.6%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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