By Sam Boughedda
Shares of Huntsman (NYSE:) were downgraded, and its price targets cut by analysts at Wells Fargo and JPMorgan on Tuesday.
The downgrades and cuts follow the company’s re-announced third-quarter earnings, reported last week.
A JPMorgan analyst downgraded Huntsman to Underweight from Neutral, lowering the price target to $25 from $30 per share.
He said the company reported that volumes are contracting in Europe, little if any demand growth from August to September in China and end-market demand slowing in the U.S.
“Volume shortfalls are exacerbated by chemical customers reducing inventories in expectation of weaker demand prospects. Oil prices have moved lower over the past month from about $97/bbl to $92/bbl. There is also a general downward movement in chemical prices from polyethylene to polypropylene to PVC to MDI,” wrote the analyst.
“We are also coming into the end of the year when the weather turns cold, and construction activity seasonally slows and prices typically soften. Off-shore currencies have also weakened versus the U.S. dollar, which is placing additional pressure on earnings performance. We expect most chemical companies to generally lower their earnings expectations for 4Q:22 when they report 3Q:22 results,” he added.
Elsewhere, a Wells Fargo analyst downgraded the shares of Huntsman to Equal-Weight from Overweight and cut the price target to $28 from $35 per share.
“We are reducing our rating from OW to EW given a large cut to our EBITDA outlook for 2022E and 2023E, as a result of weakening demand across key segments,” wrote the analyst.
The analyst explained that they expect headwinds such as sluggish demand in China, exceptionally high European prices, and softening demand in building and construction to have a “more pronounced” impact on the company’s Polyurethanes and Performance Products segments.
“Furthermore, we believe recession conditions in the U.S. in the coming year will weigh on investor sentiment, and we do not see a strong catalyst for multiple expansion despite HUN’s shift to more specialty product lines,” concluded the analyst.