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Eastman Chemical's New Projects to Boost CHDM Capacity

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Eastman Chemical (EMN - Free Report) announced a number of expansion projects to increase CHDM capacity by 15,000 metric tons at its Kingsport, TN, manufacturing facility. Spanning over a period of 18 months, these projects are expected to be completed by early 2019. The move will help the company to meet the increasing demand for copolyesters.

Eastman Chemical remains committed to expand its copolyester business. The company is witnessing tremendous growth in Tritan copolyester and strength in its copolyester product portfolio. Also, the company recently announced an additional PETG capacity which will come online in 2018 and will further strengthen its commitment toward the copolyester business.

Eastman Chemical’s shares have moved up 27.3% over a year, outperforming the industry’s 18.5% gain.


Eastman Chemical expects to drive growth on the back of innovation and high-margin products amid an uncertain global business environment. Eastman Chemical believes that disciplined capital allocation and aggressive cost management policies are likely to contribute to earnings growth and help to offset challenges faced by the company in Fibers and ethylene pricing.

Factoring in strong first-half 2017 results, the company expects adjusted earnings per share for 2017 to grow 10-12% year over year, up from its earlier view of 8-12%.

Eastman Chemical remains focused on cost-cutting and productivity actions. The company aims to achieve $100 million of cost savings in 2017.

The company remains committed to reduce debt and boost shareholder returns. Eastman Chemical returned around $325 million to shareholders during first-half 2017. The company expects to record robust earnings and generate solid free cash flow (of around $1 billion) in 2017.

Eastman Chemical is also gaining from synergies of acquisitions, especially Taminco Corporation. The Taminco acquisition has provided attractive cost and revenue synergy opportunities.

However, Eastman Chemical continues to witness pricing pressure in some of businesses. Lower prices of acetate tow are hurting its Fibers unit. Moreover, the company expects ethylene prices to be lower in second-half 2017 vis-à-vis the first half. As such, ethylene margins are expected to be under pressure in the second half. The company is also exposed to a volatile raw material pricing environment.

Eastman Chemical Company Price and Consensus

 

Eastman Chemical Company Price and Consensus | Eastman Chemical Company Quote

Eastman Chemical currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the chemical space are The Chemours Company (CC - Free Report) , Kronos Worldwide (KRO - Free Report) and Air Liquide (AIQUY - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected long-term earnings growth of 15.5%.

Kronos Worldwide has an expected long-term earnings growth of 5%.

Air Liquide has an expected long-term earnings growth of 8.1%.

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