Huntsman double upgraded at J.P. Morgan with business at cyclical bottom (NYSE:HUN)

Huntsman (NYSE:HUN) edges higher in Friday’s trading as J.P. Morgan double upgrades to Overweight from Underweight with a $27 price target, raised from $22, believing the stock likely has approached a cyclical bottom.

Huntsman’s (HUN) earnings are cyclically depressed, and the stock has been an underperformer compared to the S&P 500, 5% lower YTD vs. a market that is 12% higher and higher by 26% over the past five years vs. a market that is 85% higher; the equity value recently has been dragged down as the market has become less convinced of domestic interest rate reductions in 2024, JPM’s Jeffrey Zekauskas says.

The polyurethanes business, which accounts for more than half of Huntsman’s (HUN) EBITDA, has significant exposure to construction end markets, which continue to be challenged due to higher interest rates and slower global economic growth; while Zekauskas does not foresee a sharp recovery as a base case, he thinks business conditions likely will reach a trough in the 2023-24 period.

The analyst says Huntsman’s (HUN) value historically has lifted sharply lifted both in declining interest rate environments and in environments of accelerating economic activity; when macro fundamentals change, the stock can move so quickly and in such measure that building a position under those circumstances in unfeasible, and is best owned in advance of changes in macro fundamentals.