Here's Why You Should Buy Eastman Chemical (EMN) Stock Right Now
Eastman Chemical Company’s EMN shares have popped around 20% over the past three months. The chemical maker is benefiting from its innovation-driven growth model, operational execution and cost-management actions.
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 take a look into the factors that make this Zacks Rank #2 (Buy) stock an attractive choice for investors right now.
Healthy Growth Prospects
The Zacks Consensus Estimate for earnings for 2024 for Eastman Chemical is currently pegged at $7.96, reflecting an expected year-over-year growth of 24.9%. Moreover, earnings are expected to register a 43.8% growth in fourth-quarter 2023.
Positive Earnings Surprise History
Eastman Chemical has outpaced the Zacks Consensus Estimate in three of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 1.9%, on average.
Superior Return on Equity (ROE)
Eastman Chemical’s ROE of 13.4%, as compared with the industry average of 10.9%, manifests the company’s efficiency in utilizing shareholder’s funds.
Attractive Valuation
Valuation looks attractive as EMN’s shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.
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 9.07, cheaper compared with the industry average of 10.36.
Innovation, Cost Reductions Aid EMN
Eastman Chemical is benefiting from its actions to manage costs. The company is expected to gain from lower operating costs from its operational transformation program.
EMN was able to offset $1.3 billion in inflation from higher raw material, energy and distribution costs through price increases in 2022. It is on track to reduce manufacturing, supply chain and non-manufacturing costs by more than $200 million for 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. Due to the company's competence in specialty products, it generated around $550 million in new business revenues from innovation in 2022. Sales volumes are expected to be supported by the innovation and market development initiatives.
Eastman Chemical also remains focused on maintaining a disciplined approach to capital allocation. Its operating cash flow more than doubled year over year to $514 million in the third quarter of 2023. The company returned $94 million to shareholders in the third quarter through dividends and share repurchases. Furthermore, it expects to deliver $1.4 billion in operating cash flow for full-year 2023.
Eastman Chemical Company Price and Consensus
Eastman Chemical Company price-consensus-chart | Eastman Chemical Company Quote
Stocks to Consider
Other top-ranked stocks worth a look in the basic materials space include Cameco Corporation CCJ, Alamos Gold Inc. AGI and Cabot Corporation CBT.
Cameco has a projected earnings growth rate of 156% for the current year. The Zacks Consensus Estimate for CCJ’s current-year earnings has been revised upward by 6.7% over the past 60 days. The stock is up around 69% in a year. CCJ currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Alamos’ current-year earnings is pegged at 53 cents, indicating a year-over-year growth of 89.3%. AGI, carrying a Zacks Rank #1, beat the Zacks Consensus Estimate in all of the last four quarters, with the average earnings surprise being 25.6%. The company’s shares have rallied 17.8% in the past year.
The consensus estimate for Cabot’s current fiscal-year earnings is pegged at $6.58, indicating a year-over-year rise of 22.3%. CBT, carrying a Zacks Rank #2, beat the Zacks Consensus Estimate in three of the last four quarters while missed once, with the average earnings surprise being 2.3%. The company’s shares are up around 10% in the past year.
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Eastman Chemical Company (EMN) : Free Stock Analysis Report
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