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Huntsman Corp. (HUN) recently reported its preliminary financial results based on which CapitalCube provides a unique peer-based analysis of the company. Our analysis is based on the company's performance over the last twelve months (unless stated otherwise).

Huntsman Corp.'s analysis versus peers uses the following peer-set: Dow Chemical Co. (DOW), Eastman Chemical Co. (EMN), Ashland Inc. (ASH), Rockwood Holdings Inc. (ROC), Cytec Industries Inc. (CYT), PolyOne Corp. (POL) and Kronos Worldwide Inc. (KRO). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Quarterly (USD million)2012-09-302012-06-302012-03-312011-12-312011-09-30
Revenues2,741.02,914.02,913.02,632.02,976.0
Revenue Growth %(5.9)0.010.7(11.6)1.4
Net Income116.0126.0167.099.0(44.0)
Net Income Growth %(7.9)(24.6)68.7N/A(138.6)
Net Margin %4.24.35.73.8(1.5)
ROE % (Annualized)22.626.637.522.9(9.0)
ROA % (Annualized)5.35.77.64.5(1.9)

Valuation Drivers

Huntsman Corp.'s current Price/Book of 1.7 is about median in its peer group. We classify Huntsman Corp. as Harvesting because of the market's low expectations of growth (PE of 7.4 compared to peer median of 18.8) despite its relatively high returns (ROE of 25.3% compared to the peer median ROE of 18.5%).

The company's median net profit margins of 4.5% and relative asset efficiency (asset turns of 1.2x compared to peer median of 0.8x) give it some operating leverage. Huntsman Corp.'s net margin continues to trend upward and is now over one standard deviation above its five-year average net margin of 1.7%.

Economic Moat

Huntsman Corp.'s return on assets currently is around peer median (5.7% vs. peer median 4.9%) -- similar to its returns over the past five years (2.1% vs. peer median 2.0%). This performance suggests that the company has no specific competitive advantages relative to its peers.

The company's comparatively low gross margins of 21.8% versus peer median of 28.7% suggests that it has a non-differentiated strategy or is in a pricing constrained position. However, Huntsman Corp.'s pre-tax margin of 6.1% is around the peer median which, when combined with the gross margin, suggests lower operating costs relative to peers.

Growth & Investment Strategy

While Huntsman Corp.'s revenues growth has been above the peer median (3.2% vs. 1.8% respectively for the past three years), the stock's PE ratio of 7.4 is less than the peer median. This implies that the company's earnings are peaking and the market expects a decline in its growth expectations.

Huntsman Corp.'s annualized rate of change in capital of 0.7% over the past three years is less than its peer median of 7.6%. This below median investment level has also generated a less than peer median return on capital of 2.0% averaged over the same three years. This outcome suggests that the company has invested capital relatively poorly and now may be in maintenance mode.

Earnings Quality

Huntsman Corp.'s net income margin for the last twelve months is around the peer median (4.5% vs. peer median of 5.1%). This average margin combined with a level of accruals that is around peer median (3.5% vs. peer median of 3.1%) suggests there possibly isn't too much accrual movement flowing into the company's reported earnings.

Huntsman Corp.'s accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer median and suggests the company is recording a proper level of reserves compared to its peers.

Trend Charts

Company Profile

Huntsman Corp. is a global manufacturer of differentiated organic and inorganic chemical products. The company's products comprises of chemicals and formulations, which it markets to a diversified group of consumer and industrial customers. Its products are used in a wide range of applications which include adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals and dye industries. The company operates its business through five segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects and Pigments. Huntsman was founded on October 19, 2004 and is headquartered in Salt Lake City, UT.

Disclaimer

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Source: Earnings Analysis: Huntsman Corp.