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Why You Should Retain Eastman Chemical (EMN) in Your Portfolio
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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. However, it is exposed to certain headwinds, including soft demand.
Shares of this leading chemical maker are down 0.3% over the past year compared with the 16.4% 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
Cost Cuts and Innovation Aid EMN
Eastman is benefiting from its actions to manage costs. The company is expected to gain from lower operating costs from its operational transformation program.
EMN is taking actions to keep its manufacturing and administrative costs in control. It achieved cost savings of around $200 million in 2023, net of inflation. Pricing initiatives and lower raw material and energy costs are also expected to support the company’s bottom line.
Moreover, Eastman's goal is to increase new business revenues by utilizing its innovation-driven growth strategy. Its sales volumes are expected to be supported by the innovation and market development initiatives.
The company is also expected to gain from the revenues and earnings generated by its Kingsport methanolysis facility in 2024. The facility is expected to deliver roughly $75 million of incremental EBITDA growth in 2024.
Eastman Chemical also remains focused on maintaining a disciplined approach to capital allocation with an emphasis on debt reduction. It returned $526 million to shareholders in 2023 through dividends and share repurchases. Furthermore, the company delivered around $1.4 billion in operating cash flow in 2023. It also raised its dividend for the 14th consecutive year.
Soft Demand a Concern
The company saw soft demand and consumer de-stocking for its consumer durables, building & construction, agriculture, medical and consumables end markets in 2023. Lingering effects from customer inventory de-stocking in certain markets are expected to adversely impact its performance. EMN expects continued destocking in medical and agriculture in the first quarter of 2024. The impacts of de-stocking are likely to be felt on the company’s volumes and top line in the quarter. Soft demand in building & construction and consumer durables is also likely to continue over the near term.
Eastman Chemical faces headwinds from higher depreciation expenses due to its continued growth investments. The company sees a higher depreciation expense of $30 million this year related to its investments, including the Kingsport methanolysis facility and the new capacity for performance films in Germany and China. It also expects roughly $50 million of higher costs in 2024 associated with its investment in growth and capability development. Higher associated costs are likely to weigh on its margins.
Better-ranked stocks worth a look in the basic materials space include, Carpenter Technology Corporation (CRS - Free Report) , Alpha Metallurgical Resources Inc. (AMR - Free Report) and Hawkins, Inc. (HWKN - Free Report) .
The consensus estimate for Carpenter Technology’s current fiscal year earnings is pegged at $4.00, indicating a year-over-year surge of 250.9%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company’s shares have gained around 29% in the past year. CRS currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Alpha Metallurgical Resources’ current-year earnings has been revised upward by 8.8% in the past 60 days. It currently carries a Zacks Rank #1. AMR delivered a trailing four-quarter earnings surprise of roughly 9.6%, on average. AMR shares are up around 152% in a year.
The consensus estimate for Hawkins’ current fiscal year earnings is pegged at $3.61 per share, indicating a year-over-year rise of 26.2%. The Zacks Consensus Estimate for HWKN’s current-year earnings has been revised 4.3% upward in the past 30 days. HWKN, a Zacks Rank #2 (Buy) stock, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 30.6%. The company’s shares have rallied roughly 64% in the past year.
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Why You Should Retain Eastman Chemical (EMN) in Your Portfolio
Eastman Chemical Company (EMN - Free Report) is gaining from cost-cutting and productivity actions as well as its innovation-driven growth model. However, it is exposed to certain headwinds, including soft demand.
Shares of this leading chemical maker are down 0.3% over the past year compared with the 16.4% 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
Cost Cuts and Innovation Aid EMN
Eastman is benefiting from its actions to manage costs. The company is expected to gain from lower operating costs from its operational transformation program.
EMN is taking actions to keep its manufacturing and administrative costs in control. It achieved cost savings of around $200 million in 2023, net of inflation. Pricing initiatives and lower raw material and energy costs are also expected to support the company’s bottom line.
Moreover, Eastman's goal is to increase new business revenues by utilizing its innovation-driven growth strategy. Its sales volumes are expected to be supported by the innovation and market development initiatives.
The company is also expected to gain from the revenues and earnings generated by its Kingsport methanolysis facility in 2024. The facility is expected to deliver roughly $75 million of incremental EBITDA growth in 2024.
Eastman Chemical also remains focused on maintaining a disciplined approach to capital allocation with an emphasis on debt reduction. It returned $526 million to shareholders in 2023 through dividends and share repurchases. Furthermore, the company delivered around $1.4 billion in operating cash flow in 2023. It also raised its dividend for the 14th consecutive year.
Soft Demand a Concern
The company saw soft demand and consumer de-stocking for its consumer durables, building & construction, agriculture, medical and consumables end markets in 2023. Lingering effects from customer inventory de-stocking in certain markets are expected to adversely impact its performance. EMN expects continued destocking in medical and agriculture in the first quarter of 2024. The impacts of de-stocking are likely to be felt on the company’s volumes and top line in the quarter. Soft demand in building & construction and consumer durables is also likely to continue over the near term.
Eastman Chemical faces headwinds from higher depreciation expenses due to its continued growth investments. The company sees a higher depreciation expense of $30 million this year related to its investments, including the Kingsport methanolysis facility and the new capacity for performance films in Germany and China. It also expects roughly $50 million of higher costs in 2024 associated with its investment in growth and capability development. Higher associated costs are likely to weigh on its margins.
Eastman Chemical Company Price and Consensus
Eastman Chemical Company price-consensus-chart | Eastman Chemical Company Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include, Carpenter Technology Corporation (CRS - Free Report) , Alpha Metallurgical Resources Inc. (AMR - Free Report) and Hawkins, Inc. (HWKN - Free Report) .
The consensus estimate for Carpenter Technology’s current fiscal year earnings is pegged at $4.00, indicating a year-over-year surge of 250.9%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company’s shares have gained around 29% in the past year. CRS currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Alpha Metallurgical Resources’ current-year earnings has been revised upward by 8.8% in the past 60 days. It currently carries a Zacks Rank #1. AMR delivered a trailing four-quarter earnings surprise of roughly 9.6%, on average. AMR shares are up around 152% in a year.
The consensus estimate for Hawkins’ current fiscal year earnings is pegged at $3.61 per share, indicating a year-over-year rise of 26.2%. The Zacks Consensus Estimate for HWKN’s current-year earnings has been revised 4.3% upward in the past 30 days. HWKN, a Zacks Rank #2 (Buy) stock, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 30.6%. The company’s shares have rallied roughly 64% in the past year.