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Eastman Chemical Up 20% in 6 Months: What's Driving It?

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Shares of Eastman Chemical Company (EMN - Free Report) have popped roughly 20% over the last six months, outperforming the industry’s decline of roughly 1.1%.

The company has a market cap of roughly $15.5 billion and average volume of shares traded in the last three months is around 1,154.5K. The company has an expected long-term earnings per share growth rate of 9.4%.

Let’s take a look into the factors that are driving this chemical company.


Driving Factors

Forecast-topping first-quarter earnings performance and upbeat 2018 view have contributed to the rally in Eastman Chemical’s shares. It is also gaining from its growth investments, strong growth of its high-margin products, synergies of strategic acquisitions and productivity initiatives.

Eastman Chemical saw higher profits in the first quarter, aided by strong growth in its specialty businesses and cost-management actions. Adjusted earnings of $2.23 per share for the quarter topped the Zacks Consensus Estimate of $2.11.

Revenues rose around 13% year over year to $2,607 million in the quarter, also coming ahead of the Zacks Consensus Estimate of $2,461 million.

Eastman Chemical raised its earnings growth expectations for 2018 based on strong first-quarter results. The company now expects adjusted earnings per share growth for 2018 to be 10-14% year over year, up from its prior view of 8-12% growth. The company also noted that it will remain committed to offset volatility in raw material and energy prices, especially olefins.

Eastman Chemical’s high margin products and its aggressive cost management actions are likely to continue to drive its earnings. Its focus on productivity and cost-cutting actions 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.

The company should also gain from its strategic acquisitions, especially Taminco Corporation. The buyout has strengthened the company’s foothold in attractive niche end-markets including food, feed and agriculture where it has a strong presence. The acquisition has also provided attractive cost and revenue synergy opportunities.

Moreover, Eastman Chemical is committed to boosting shareholder returns leveraging strong free cash flows. The company returned roughly $180 million to shareholders during the first quarter leveraging healthy free cash flows. The company expects to generate solid free cash flow (of more than $1.1 billion) in 2018.

Eastman Chemical currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Stocks in the basic materials space worth considering include The Chemours Company (CC - Free Report) , Huntsman Corporation (HUN - Free Report) and Celanese Corporation (CE - Free Report) , each carrying a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected long-term earnings growth rate of 15.5%. Its shares have gained roughly 22% over a year.

Huntsman has an expected long-term earnings growth rate of 8.3%. The company’s shares have moved up around 29% in a year.

Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have rallied roughly 32% over a year.

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