US firm cuts '11, '12 Huntsman profit estimates after stock rout

05 August 2011 20:39  [Source: ICIS news]

NEW YORK (ICIS)--US investment bank Jefferies & Co has cut 2011 and 2012 profit estimates on US-based chemical producer Huntsman on Friday, a day after the company announced second-quarter results that fell short of Wall Street expectations.

Analyst Laurence Alexander cut his 2011 earnings per share estimate on Huntsman by 15 cents (€0.11), to $1.90, and his 2012 forecast by 55 cents, to $2.15. The company earned 75 cents/share in 2010.

On Thursday, Huntsman posted second-quarter earnings per share of 48 cents, a penny shy of Wall Street estimates.

The shares plunged $5.49, or 30.5%, to $12.50 that day.

“The decline in Huntsman shares probably speaks more to apprehensions among investors at prospects of economic weakness, and therefore an immediate preference for less cyclical entities, than it does to any company-specific factor,” said Jeffrey Zekauskas, analyst with global investment bank JP Morgan in a research note.

The stock price “pullback creates [an attractive] entry point if [the] economy muddles through”, said Jefferies & Co’s Alexander in a research note.

“Chemical shares have in some cases shifted below our ‘trough/scare’ valuation models. Further downside for these companies would require a severe ratcheting down of growth forecasts for 2012,” Alexander said.

“If the current liquidity scare fades, we expect shares to gravitate first to mid-cycle valuations as a relief rally, and then move more slowly from there,” he added.

The analyst estimates a mid-cycle valuation level of $26/share, and has a price target of $21 on Huntsman.

Alexander expects Huntsman’s margins for methyl di-p-phenylene isocyanate (MDI) to rise in the third quarter.

Shares of Huntsman were up 20 cents, or 1.6%, to $12.70 in late Friday afternoon trading on the New York Stock Exchange.

Huntsman also announced on Friday a share repurchase programme worth up to $100m.

The programme is effective immediately, the company said.

Under it, Huntsman will repurchase the stock through the open market or in privately negotiated transactions, it said.

In a statement, chief executive Peter Huntsman said, "Yesterday, we announced one of the strongest quarters in our company's history. This share repurchase program is an expression of confidence in the company's long-term future and ability to create further shareholder value."

Additional reporting by Al Greenwood

($1 = €0.71)

For more on MDI visit ICIS chemical intelligence
For more on Huntsman visit ICIS company intelligence

By: Joseph Chang
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