Deutsche Bank (ETR:DBKGn) has adjusted its stance on Huntsman Corporation (NYSE: NYSE:HUN), a global manufacturer of differentiated and specialty chemicals, by reducing the company's price target.
The price target has been revised to $23.00, down from the previous $27.00, while the Hold rating on the stock remains unchanged.
The firm's analysis suggests that for Huntsman to see an uptick in construction activity and a subsequent growth in earnings toward mid-cycle levels, several conditions must be met.
These include stronger economic growth in China, some level of growth in Europe, and a recovery in the U.S. housing market. Despite the anticipation that lower interest rates should boost activity across these regions, especially in the U.S., the firm anticipates that this may not occur until the second half of 2025 at the earliest.
Huntsman's earnings before interest, taxes, depreciation, and amortization (EBITDA) forecasts for 2025 and 2026 are estimated at $615 million and $750 million, respectively, by Deutsche Bank.
These projections fall significantly short of Huntsman's target of over $1 billion in mid-cycle EBITDA. The firm acknowledges that Huntsman's key end market, construction, which is tied to 40-45% of its portfolio, is only showing modest signs of improvement.
The analysis concludes that while Huntsman is currently underperforming considering the sluggishness in the global construction sector, progress toward achieving its mid-cycle EBITDA target is expected to be gradual.
In other recent news, Huntsman Corporation reported Q2 2024 adjusted EBITDA of $131 million, slightly above the Bloomberg consensus estimate. Despite the overall EBITDA meeting expectations, segment performance varied with the Performance Products and Polyurethane divisions experiencing declines, and only the Advanced Materials segment showing a marginal increase.
Goldman Sachs (NYSE:GS) has since adjusted its Q3 EBITDA estimate for Huntsman to align with the lower end of the company's projected range and lowered the price target on the company's shares, maintaining a sell position.
Huntsman Corporation also reported an increase in its Q2 2024 margins, following a volume increase of 9% year-over-year and 8% quarter-over-quarter. This improvement has been attributed to the company's successful cost initiatives. However, the advanced materials business is facing a negative price mix due to changes in product mix, and challenges in the Chinese joint venture may impact the polyurethanes business.
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