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Eastman Chemical Co. (EMN)

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We are reaffirming our Outperform recommendation on Eastman Chemical Co. (EMN). Second quarter adjusted earnings topped the Zacks Consensus Estimate while sales missed. However, the company continues to expect double-digit earnings growth in 2012.

We believe that Eastman Chemical is well placed to benefit in the second half from the synergies of the Solutia acquisition. The company's diversified chemical portfolio, along with its integrated and diverse downstream businesses, is driving its earnings. It also benefits from business restructuring, cost-cutting measures and increased capacity additions.

On a P/E basis, the stock is trading at a discount to the peer group. Our long-term Outperform recommendation indicates that it will perform above the broader market. Our price target of $65 is based on 12.5x our fiscal 2012 earnings estimate.

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