Huntsman Corporation (HUN), Eastman Chemical Company (EMN): Two Buys and 1 Sell In the Chemical Industry

Page 1 of 2

The financial meltdown of 2008 was particularly hard on cyclical stocks. Companies in the chemical industry reported huge losses in the recessionary period, and 45 U.S. chemical companies had to file for bankruptcy in 2008.

With the economic recovery taking hold, chemical companies have shown signs of relief. The U.S. chemical industry accounts for 15% of the world’s chemical industry output, and its contribution towards the GDP of the United States stands at a staggering 25%. We can expect some solid investment opportunities to arise here as the industry has a growth outlook in the United States and internationally.

Huntsman Corporation (NYSE:HUN)

Larger chemical companies have a better chance of exploiting the revival in the chemical industry as they have global operations with access to multidimensional markets. Three companies in the United States fall into this criterion. They are Huntsman Corporation (NYSE:HUN), The Dow Chemical Company (NYSE:DOW) and Eastman Chemical Company (NYSE:EMN).

Huntsman’s weak fundamentals

Huntsman Corporation (NYSE:HUN) is a global leader in the consumer and industrial chemical industry. The company’s annual revenues are close to $11 billion. Like all cyclical stocks, the company suffered in the financial meltdown, but the trailing three years have seen the company’s performance improve.

The pigment segment of the company has been its fastest growing segment. The segment was reporting strong margins until prices for titanium dioxide started to fall. Due to this change, the company reported a net loss of $24 million in the first quarter.

The second-fastest growing segment of the company is its polyurethane segment because the company’s margins for MDI urethanes have improved. The earnings from this segment were able to partially offset the negative earnings from the pigment segment. Huntsman Corporation (NYSE:HUN) is planning to expand its polyurethane business by acquiring the privately held specialty urethane polyols maker Oxid. The acquisition will improve the company’s footprint and possibly take it out of its recent losses.

The current situation of the company looks slim and I would not be investing my money in this company.

The Dow Chemical Company (NYSE:DOW)’s attractive dynamics

The Dow Chemical Company (NYSE:DOW) is the second largest chemical company globally. Its chemical products are used as raw materials in different industries. The first quarter sales of the company dropped 2% on a year-over-year basis. However, the company expects its performance plastics, electronic & functional materials and agricultural sciences segments to show robust growth in the coming months.

The company has been successful in increasing its quarterly cash flow from operations. As of March 2013, the company has received up to $2.48 billion from its K-Dow transaction with the Petrochemical Industries Company of Kuwait. The Dow Chemical Company (NYSE:DOW) used this amount to repurchase $1.5 billion of its shares and reduce the company’s gross debt. The lower amounts of debt would reduce the interest expense of the company making it a less risky investment.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!