Eastman Chemical a Hold on Costs

Eastman Chemical Co. (EMN - Analyst Report) has a strong fibers business and solid financials. The company is likely to benefit from its recent focus on the industrial gasification business. However, the company is witnessing rising raw material prices and a declining demand for its products. There is a lack of free cash flow, PET capacity increases coupled with slowing growth and PET industry overcapacity.

On December 3, 2008, Eastman expects fourth quarter 2008 earnings to be significantly below the prior guidance of 90 cents per share. The company expects sales for the fourth quarter of 2008 to drop more than 20% from the year-ago period. Eastman attributes the drop to the unprecedented volatility in demand and raw material costs.

Currently, Eastman is valued at 5.2x our 2008 earnings estimate of $5.53 per share.  We rate the stock a Hold with a target of $27.00. This is 4.9x our 2008 earnings estimate.

Read the full analyst report on EMN

Read the full analyst report on EMN