Eastman Chemical Company
’s
EMN
shares have gained roughly 22% over the past three months. The company, currently carrying a Zacks Rank #2 (Buy), is benefiting from its innovation-driven growth model, cost-reduction actions and acquisitions.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks poised to carry the momentum ahead.
Let’s delve deeper into the factors that make this chemical maker an attractive choice for investors right now.
Price Performance
Shares of Eastman Chemical have rallied 39.7% over the past six months against the 32.5% growth of its
industry
. It has also outperformed the S&P 500’s 17.7% rise over the same period.
Estimates Going Up
Over the past two months, the Zacks Consensus Estimate for Eastman Chemical for 2020 has increased around 0.7%. The consensus estimate for 2021 has also been revised 0.8% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
Positive Earnings Surprise History
Eastman Chemical has outpaced the Zacks Consensus Estimate in three of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 4.9%, on average.
Cash Deployment
Eastman Chemical remains committed to maintain a disciplined approach to capital allocation, with an emphasis on financing its dividend and debt reduction. The company returned $269 million to its shareholders through dividends during the first nine months of 2020 and $90 million in the third quarter. Last month, it also raised its quarterly dividend by 5% to 69 cents per share. Notably, the company hiked its dividend for the 11th consecutive year.
Moreover, the company is taking actions to boost its cash flows. These include reduction of capital expenditure. It expects to generate more than $1 billion of free cash flow for full-year 2020.
Superior Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Eastman Chemical is 13.1%, above the industry’s level of 9%.
Growth Drivers in Place
Eastman Chemical is benefiting from innovation, cost-management actions, acquisitions and improved demand across its end markets from the coronavirus-led slowdown. It is seeing a recovery of late across building & construction, tires, automotive and consumer durables markets.
The company is also taking an aggressive approach to cost management in the wake of the pandemic. It expects to deliver roughly $150 million of cost savings for full-year 2020 with around $40 million anticipated in the fourth quarter. These cost initiatives include reduction of discretionary spending. The company’s cost reduction actions are expected to contribute to its earnings.
Eastman Chemical also remains focused on growing new business revenues from innovation. In particular, the company’s Advanced Materials segment has a number of products that are driving new business revenues.
The company is also benefiting from synergies of acquisitions. The acquisition of Marlotherm heat transfer fluids manufacturing assets in Germany has allowed the company to boost its heat transfer fluids product offerings to customers globally. Moreover, the acquisition of Spain-based cellulosic yarn producer, INACSA reinforces the growth of the company’s textiles innovation products like Naia cellulosic yarn.
Eastman Chemical Company Price and Consensus
Eastman Chemical Company price-consensus-chart
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Eastman Chemical Company Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include
Fortescue Metals Group Limited
FSUGY
,
Impala Platinum Holdings Limited
IMPUY
and
BHP Group
BHP
.
Fortescue has a projected earnings growth rate of 75.5% for the current fiscal. The company’s shares have surged around 141% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Impala Platinum has an expected earnings growth rate of 189.4% for the current fiscal. The company’s shares have rallied around 32% in the past year. It currently carries a Zacks Rank #1.
BHP Group has a projected earnings growth rate of 59.5% for the current fiscal year. The company’s shares have gained around 25% in a year. It currently carries a Zacks Rank #1.
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