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Eastman Chemical (EMN) Stock Up 27% in 3 Months: Here's Why

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Eastman Chemical Company’s (EMN - Free Report) shares have shot up 27.4% over the past three months. The rally has resulted in the stock outperforming its industry’s rise of 9.7% over the same time frame.

The chemical maker has a market cap of roughly $13.9 billion and average volume of shares traded in the last three months is around 909.9K.

 

 

Let’s take a look into the factors that are driving this Zacks Rank #3 (Hold) stock.

What’s Aiding the Stock?

Eastman Chemical is benefiting from its innovation-driven growth model, cost-management actions, acquisitions and improved demand across its end markets from the coronavirus-led slowdown. The company 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 is on track to deliver roughly $150 million of cost savings for 2020 with around $40 million expected 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 in 2020.

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.

Moreover, 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. It also recently raised its quarterly dividend by 5% to 69 cents per share. Notably, the company hiked its dividend for the 11th consecutive year.

Eastman Chemical also expects to reduce net debt by more than $600 million in 2020. 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 this year.

 

 

Stocks to Consider

Better-ranked stocks worth considering in the basic materials space include Bunge Limited (BG - Free Report) , Impala Platinum Holdings Limited (IMPUY - Free Report) and BHP Group (BHP - Free Report) .

Bunge has an expected earnings growth rate of 43% for the current year. The company’s shares have gained around 15% in the past year. It currently carries 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 131.7% for the current fiscal. The company’s shares have rallied around 25% in the past year. It currently carries a Zacks Rank #2 (Buy).

BHP Group has a projected earnings growth rate of 32.4% for the current fiscal year. The company’s shares have gained around 21% in a year. It currently carries a Zacks Rank #2.

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