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Eastman Chemical Buys INACSA, Fortifies Global Fibers Unit

Zacks Equity Research

Eastman Chemical Company EMN has entered into a definitive deal to purchase Spain-based cellulosic yarn producer, Industrias del Acetato de Celulosa S.A. (INACSA). The deal is expected to be completed in third-quarter 2019, subject to the receipt of required regulatory approvals and other customary closing conditions. Specific terms of the transaction were undisclosed by the company.

Eastman Chemical will purchase the yarn business and related assets from INACSA. This includes plant and assets in La Batlloria, Spain along with intellectual property, formulations and customer contracts.

The buyout is expected to support consistent growth of Naia cellulosic yarn for the apparel market. Notably, the INACSA yarn business and assets will become part of the company’s global Fibers segment supply base.

Moreover, the acquisition is in sync with Eastman Chemical's growth strategy along with the objective of delivering superior value through balanced and disciplined uses of cash for dividend payments, share repurchases, debt repayment as well as inorganic and organic growth measures.

Eastman Chemical's shares are down 25.1% in the past year compared with 34.3% decline of the industry.

Eastman Chemical expects strong earnings growth in the second quarter on a sequential comparison basis. However, the company expects the difficult global business environment to persist through first-half 2019.

It is undertaking additional cost-reduction initiatives in the wake of a challenging business environment. The company expects global economy to strengthen in the second half of 2019. The company continues to expect adjusted earnings per share growth of 6-10% in 2019.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Materion Corporation MTRN, Flexible Solutions International Inc FSI and AngloGold Ashanti Limited AU. These stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 27.3% for 2019. The company’s shares have gained 22.4% in the past year.

Flexible Solutions has a projected earnings growth rate of 342.9% for the current year. The company’s shares have surged 142.5% in a year’s time.

AngloGold has an estimated earnings growth rate of 90.6% for the current year. Its shares have rallied 106.5% in the past year.

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