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Here's Why You Should Hold Eastman Chemical (EMN) for Now
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Eastman Chemical Company (EMN - Free Report) is gaining from cost-cutting and productivity actions as well as its innovation-driven growth model amid certain headwinds including higher raw material, energy and logistics costs.
Shares of this leading chemical maker are down 30.8% over the past year compared with the 13% decline of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
What’s Aiding EMN?
Eastman Chemical is gaining from its actions to manage costs. The company is expected to benefit from lower operating costs from its operational transformation program and lower manufacturing shutdowns this year. It expects lower manufacturing and maintenance costs in 2022. The company’s cost actions are expected to contribute to its earnings per share this year.
The company is also focused on generating new business revenues from innovation. Eastman Chemical generated roughly $600 million of new business revenues from innovation in 2021, driven by the strength in its specialty products. The company expects its specialty portfolio to drive sales growth across major markets such as consumer durables, building & construction, and transportation in 2022.
Eastman Chemical will also gain from its strategic acquisitions and pricing actions to counter the cost inflation. Strong end-market demand is also supporting its top line growth. The company is seeing strong demand in major markets, including semiconductors, agriculture, personal care, and animal nutrition.
Eastman Chemical is also committed toward maintaining a disciplined approach to capital allocation, with an emphasis on financing its dividend and debt reduction. The company returned $1.4 billion to shareholders through share repurchases and dividends during 2021. Eastman Chemical also repaid $350 million of debt in 2021. The company also returned $850 million to its shareholders through share repurchases and dividends in the second quarter of 2022. It expects to buyback more than $1 billion of shares in 2022. Eastman Chemical also expects to generate operating cash flow of around $1.5 billion in 2022.
A Few Headwinds
Eastman Chemical faces headwinds from higher raw material, energy and distribution costs in some of its products. It saw headwinds from higher raw material, energy and distribution costs in the first half of 2022. These costs are expected to remain at the high levels in 2022.
The company is also exposed to headwinds from supply-chain disruptions, partly associated with the pandemic. It witnessed unfavorable impacts from supply chain constraints and higher logistics costs in the second quarter. Headwinds associated with supply and logistics are likely to continue to impact its third-quarter 2022 results.
The slowdown in automotive production is also a concern. The semiconductor shortage is affecting automotive production globally. The Russia-Ukraine conflict has exacerbated the chip crisis. Weaker automotive production due to component shortages is likely to affect demand in this market over the near term.
Better-ranked stocks worth considering in the basic materials space include Albemarle Corporation (ALB - Free Report) , Brigham Minerals, Inc. and Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) .
Albemarle, sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 426.7% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 22.1% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 27% in a year.
Brigham Minerals, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 150.9% for the current year. The consensus estimate for MNRL's earnings for the current year has been revised 7.8% upward in the past 60 days.
Brigham Minerals’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 13.9%. MNRL has gained around 35% over a year.
Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.
Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 70% in a year. The company carries a Zacks Rank #2 (Buy).
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Here's Why You Should Hold Eastman Chemical (EMN) for Now
Eastman Chemical Company (EMN - Free Report) is gaining from cost-cutting and productivity actions as well as its innovation-driven growth model amid certain headwinds including higher raw material, energy and logistics costs.
Shares of this leading chemical maker are down 30.8% over the past year compared with the 13% decline of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
What’s Aiding EMN?
Eastman Chemical is gaining from its actions to manage costs. The company is expected to benefit from lower operating costs from its operational transformation program and lower manufacturing shutdowns this year. It expects lower manufacturing and maintenance costs in 2022. The company’s cost actions are expected to contribute to its earnings per share this year.
The company is also focused on generating new business revenues from innovation. Eastman Chemical generated roughly $600 million of new business revenues from innovation in 2021, driven by the strength in its specialty products. The company expects its specialty portfolio to drive sales growth across major markets such as consumer durables, building & construction, and transportation in 2022.
Eastman Chemical will also gain from its strategic acquisitions and pricing actions to counter the cost inflation. Strong end-market demand is also supporting its top line growth. The company is seeing strong demand in major markets, including semiconductors, agriculture, personal care, and animal nutrition.
Eastman Chemical is also committed toward maintaining a disciplined approach to capital allocation, with an emphasis on financing its dividend and debt reduction. The company returned $1.4 billion to shareholders through share repurchases and dividends during 2021. Eastman Chemical also repaid $350 million of debt in 2021. The company also returned $850 million to its shareholders through share repurchases and dividends in the second quarter of 2022. It expects to buyback more than $1 billion of shares in 2022. Eastman Chemical also expects to generate operating cash flow of around $1.5 billion in 2022.
A Few Headwinds
Eastman Chemical faces headwinds from higher raw material, energy and distribution costs in some of its products. It saw headwinds from higher raw material, energy and distribution costs in the first half of 2022. These costs are expected to remain at the high levels in 2022.
The company is also exposed to headwinds from supply-chain disruptions, partly associated with the pandemic. It witnessed unfavorable impacts from supply chain constraints and higher logistics costs in the second quarter. Headwinds associated with supply and logistics are likely to continue to impact its third-quarter 2022 results.
The slowdown in automotive production is also a concern. The semiconductor shortage is affecting automotive production globally. The Russia-Ukraine conflict has exacerbated the chip crisis. Weaker automotive production due to component shortages is likely to affect demand in this market over the near term.
Eastman Chemical Company Price and Consensus
Eastman Chemical Company price-consensus-chart | Eastman Chemical Company Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include Albemarle Corporation (ALB - Free Report) , Brigham Minerals, Inc. and Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) .
Albemarle, sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 426.7% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 22.1% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 27% in a year.
Brigham Minerals, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 150.9% for the current year. The consensus estimate for MNRL's earnings for the current year has been revised 7.8% upward in the past 60 days.
Brigham Minerals’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 13.9%. MNRL has gained around 35% over a year.
Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.
Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 70% in a year. The company carries a Zacks Rank #2 (Buy).