Eastman Chemical Company (EMN - Free Report) stock looks promising at the moment. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let’s delve deeper into the factors that make this chemical company an attractive investment option.
What’s Working in Favor of EMN?
An Outperformer: Eastman Chemical, a Zacks Rank #2 (Buy) stock, has outperformed the industry it belongs to over the last three months. The company’s shares have gained around 21.2% over this period, compared with roughly 2.7% gain recorded by the industry.
Forecast-topping earnings performance in the last reported quarter and a buoyant outlook for 2018 have contributed to a rally in Eastman Chemical’s shares. The company is gaining from its cost-reduction actions and growth of its high margin products.
Strong Q4 and Upbeat Outlook: Eastman Chemical saw its profits soar in the fourth quarter of 2017, aided by strong growth of high-margin products in its specialty businesses. The company’s profits surged five-fold year over year to $581 million or $4.01 per share in the quarter. Adjusted earnings of $1.62 per share for the quarter trounced the Zacks Consensus Estimate of $1.06.
Revenues rose around 8% year over year to $2,362 million in the quarter on higher sales across most segments and also surpassed the Zacks Consensus Estimate of $2,289.5 million.
The company expects to drive growth in 2018 on the back of investments, innovation and high margin products. It also sees modestly lower tax rate to support earnings growth in 2018. The company expects adjusted earnings per share growth in 2018 to be 8-12% year over year.
Eastman Chemical remains focused on cost-cutting and productivity actions, which is helping it to offset raw material cost inflation and other cost headwinds. The company expects to deliver $100 million of cost savings in 2018 under its cost-reduction program. Its cost-reduction actions are expected to contribute to its earnings per share in 2018.
The company should also gain from its strategic acquisitions, especially Taminco. Further, it remains committed to reduce debt and boost shareholder returns leveraging strong free cash flows.
Estimates Northbound: Annual earnings estimates for Eastman Chemical have moved north over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2018 has moved up 3.6% to $8.53 per share. The Zacks Consensus Estimate for 2019 has also increased 3.7% to $9.31 per share.
Positive Earnings Surprise History: Eastman Chemical has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 17.7%.
Attractive Valuation: Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Eastman Chemical is currently trading at trailing 12-month EV/EBITDA multiple of 11.8, cheaper compared with the industry average of 17.
Other Stocks to Consider
Other top-ranked companies in the chemicals space include Kronos Worldwide, Inc. (KRO - Free Report) , LyondellBasell Industries N.V. (LYB - Free Report) and Air Products and Chemicals, Inc. (APD - Free Report) .
Kronos sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 5%. Its shares have rallied roughly 10% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
LyondellBasell carries a Zacks Rank #1 and has an expected long-term earnings growth rate of 9%. Its shares have rallied around 16% over the past six months.
Air Products has an expected long-term earnings growth rate of 16.3% and carries a Zacks Rank #2. Its shares have gained 14% over the past six months.
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