On Friday, JPMorgan (NYSE:JPM) made a notable adjustment to its stance on Huntsman Corporation (NYSE:HUN), upgrading the stock from Neutral to Overweight and simultaneously raising the price target to $27 from the previous $22. This shift reflects the firm's view that Huntsman's shares have potentially reached a cyclical low point and now present a significant opportunity for above-average capital appreciation over an extended timeframe.
Huntsman, known for producing semi-commodity insulation materials such as MDI, which are used in the construction and automotive industries, has experienced cyclically depressed earnings. The company has not performed as well as the broader market, underperforming the S&P 500 Index. Year-to-date, Huntsman's shares have decreased by 5% compared to the market’s 12% gain. Over the past year, the company's shares have fallen by 10% while the market has increased by 25%. However, over a five-year span, Huntsman's shares have grown by 26%, albeit underperforming against the market's 85% rise.
The valuation of Huntsman has recently suffered due to a shift in market sentiment, with less confidence in domestic interest rate reductions for 2024. Despite this, JPMorgan suggests that Huntsman's share price has established a support level around its current price over the past five years, with the exception of the downturn experienced in 2020.
JPMorgan's updated outlook signals a belief in the potential for Huntsman's recovery and growth, despite the stock's historical underperformance in comparison to the general market. The new price target of $27 represents a notable increase from the previous target and suggests confidence in the stock's future trajectory.
In other recent news, Huntsman Corporation has been the subject of several analyst adjustments. Deutsche Bank (ETR:DBKGn) reduced Huntsman's stock price target to $27, maintaining a hold rating due to modest signs of improvement in the company's key end market, construction. On the other hand, RBC Capital Markets raised Huntsman's price target from $24 to $26 based on improved EBITDA outlook, while BofA Securities slightly reduced the price target to $29 but kept a buy rating on recovery prospects.
In terms of financial developments, Huntsman Corporation announced a cash dividend of $0.25 per share for its common stock, reflecting confidence in the company's financial stability and cash flow. The company reported revenues of approximately $6 billion for the year 2023.
In the company's First Quarter 2024 Earnings Call, CEO Peter Huntsman highlighted modest volume gains and a strategic focus on improving cash flow and cost management. The company anticipates slow and steady volume growth in its polyurethanes business and outlined initiatives for future EBITDA growth.
InvestingPro Insights
In light of JPMorgan's upgraded stance on Huntsman Corporation (NYSE:HUN), insights from InvestingPro provide a deeper understanding of the company's financial health and market position. With a market capitalization of $4.1 billion, Huntsman is navigating through challenging times, reflected in a negative P/E ratio of -46.29. This metric underscores the recent earnings difficulties the company has faced. However, the PEG ratio, sitting at 0.42, suggests that Huntsman may have growth potential that is not reflected in its current earnings alone. Additionally, the company maintains a dividend yield of 4.22%, which is appealing to income-focused investors, especially considering Huntsman's track record of dividend growth, up 5.26% over the last twelve months as of Q1 2023.
InvestingPro Tips highlight that Huntsman has raised its dividend for three consecutive years and has maintained dividend payments for 18 consecutive years, signaling a commitment to returning value to shareholders. Moreover, analysts predict the company will be profitable this year, which could signal a turnaround from the losses experienced over the last twelve months. For investors considering Huntsman, it's worth noting that the stock is trading near its 52-week low, potentially offering an attractive entry point.
For those seeking additional insights, there are more InvestingPro Tips available, which can be accessed through the dedicated page for Huntsman at https://www.investing.com/pro/HUN. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of expert analysis and tips to inform your investment decisions.
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