On Monday, Deutsche Bank adjusted its outlook on Huntsman Corporation (NYSE:HUN), a global manufacturer and marketer of differentiated chemicals, by reducing the stock's price target to $27 from $28, while retaining a Hold rating on the shares. The revision reflects a cautious stance on the company's near-term earnings potential despite its significant underperformance and potential for growth.
The firm's analyst noted that Huntsman's key end market, construction, which constitutes 40-45% of its portfolio, is only showing modest signs of improvement. This tepid recovery in the construction sector is anticipated to result in a gradual progress towards Huntsman's mid-cycle EBITDA (earnings before interest, taxes, depreciation, and amortization).
The analyst further commented on the valuation of Huntsman, stating that at 12.0 times estimated 2024 EBITDA and 8.6 times projected 2025 EBITDA, the stock's valuation is considered fair. Consequently, the firm suggests that it may be premature for investors to initiate positions in Huntsman shares at this juncture.
Huntsman Corporation's stock price adjustment by Deutsche Bank comes amid a backdrop of the company's under-earning status and its leverage to recovering volumes. Despite the potential for recovery, the slow pace of improvement in its principal market is a factor in the cautious price target.
InvestingPro Insights
As investors digest the cautious outlook from Deutsche Bank on Huntsman Corporation, real-time data from InvestingPro provides additional context for those monitoring the stock. With a market capitalization of $4.3 billion, Huntsman's financial health and stock valuation can be further understood through a few key metrics. The company's P/E ratio stands at a negative 48.92, reflecting market skepticism about its earnings potential. However, some optimism is seen in the PEG ratio of 0.44, suggesting that the company's earnings growth could be undervalued relative to its peers.
InvestingPro Tips highlight that Huntsman has a history of maintaining its dividend payments, with an increase for the past 3 consecutive years and a consistent track record over the past 18 years. This could be a sign of the company's commitment to shareholder returns. Additionally, analysts predict that Huntsman will be profitable this year, which could signal a turnaround from its recent performance. Despite eight analysts revising their earnings estimates downwards for the upcoming period, the dividend yield stands at an attractive 4.03%, and the company is trading at a high EBIT valuation multiple.
Investors looking for deeper insights can find additional InvestingPro Tips on Huntsman at https://www.investing.com/pro/HUN. For those considering a subscription to InvestingPro, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to numerous other InvestingPro Tips that can help navigate market uncertainties.
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