Huntsman's (NYSE: HUN) shares popped on first-quarter earnings that crushed Street estimates by a huge margin. The chemical maker has been doing well consistently, and a look at the finer points tells me the momentum is here to stay.

Huntsman surprised me with the performance in its largest division, polyurethane. While Europe has become a pain for most companies, Huntsman saw demand from the region strengthening for MDI, one of its key products. Its volumes were up by 4% from the year-ago quarter. Peer Dow Chemical's (NYSE: DOW) first-quarter polyurethane sales in general were also up on volumes, although prices fell.

But since volumes haven't been too great, Huntsman has aggressively resorted to price increases to improve the division's margins, and as a result, the division's top line grew 17% in the first quarter. It has already announced further price increases for the next quarter, so we can expect this division to continue doing well in the near future.

Another bit of good news was an uptick in demand for titanium dioxide, which has been doing a great job driving up revenue for producers like Huntsman, Kronos Worldwide (NYSE: KRO), and DuPont (NYSE: DD) last year. Then things turned around in the fourth quarter, when customer destocking of the pigment slammed the brakes on that run and hurt margins. Input costs rose steadily at the same time.

Fortunately, better days might just be around the corner. DuPont, which is also the world's largest producer of the pigment, thinks the destocking phase has already come to an end. Both companies saw volumes rising sequentially during the first quarter and are expecting higher sales in the next quarter.

As for higher input costs, Huntsman has already booked some low-price contracts that should take care of 40% of its input requirements. More importantly, like DuPont and Kronos, it will continue passing the buck to customers to offset costs during the year. So there's not much to be worried about here.

Stepping on the gas
Huntsman has also impressed me with its efforts to take advantage of the sharp dip in natural gas prices. Low gas prices are acting as a trigger for some big investments. Dow Chemical recently announced several plans including setting up an ethylene plant in Texas and new propylene facilities, as well as restarting an existing cracker. Westlake Chemical (NYSE: WLK) is likewise expanding two of its ethylene crackers and planning other moves to increase ethylene capacity significantly.

CEO Peter Huntsman early this year spoke about how his company would continue to look at expansion opportunities to make the most of low gas prices. In line with his goals, the company, according to Bloomberg, recently announced plans to increase capacity of ethylene oxide by 250 million pounds in North America, which translates into a 25% rise from current levels. Any move initiated to take advantage of cheap gas could, I think. prove to be a big boon for Huntsman in the future.

The Foolish bottom line
CFO Kimo Esplin told Reuters his company won't raise its dividend right now, and I support that decision. The company wants to improve the credit rating of its bonds first. Huntsman's total-debt-to-equity ratio is pretty high at 222%, so that's a good reason to hold off as well. In such situations, a moderate dividend payout ratio acts as a margin of safety till debt levels reduce. And anyway, its current dividend yield is pretty decent at 2.8%.

Overall, I have high hopes from Huntsman, and I suggest you track the company by adding it to your stock Watchlist.

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