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Here's Why You Should Hold Onto Eastman Chemical (EMN) for Now

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·4 min read
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Eastman Chemical Company EMN is gaining from cost-cutting and productivity actions as well as its innovation-driven growth model amid certain headwinds including higher raw material, energy and logistics costs.

Shares of this leading chemical maker are down 13.5% over the past year compared with the 4.8% decline of its industry.

 

Zacks Investment Research
Zacks Investment Research


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Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

What’s Aiding EMN?

Eastman Chemical is gaining from its actions to manage costs. The company is expected to benefit from lower operating costs from its operational transformation program and lower manufacturing shutdowns this year. It expects lower manufacturing and maintenance costs in 2022. The company’s cost actions are expected to contribute to its earnings per share this year.

The company is also focused on generating new business revenues from innovation. Eastman Chemical generated roughly $600 million of new business revenues from innovation in 2021, driven by the strength in its specialty products. The company expects its specialty portfolio to drive sales growth across major markets such as consumer durables, building & construction, and transportation in 2022.

Eastman Chemical will also gain from its strategic acquisitions and pricing actions to counter the cost inflation. Strong end-market demand is also supporting its top line growth. The company is seeing strong demand in major markets, including building and construction, personal care, and animal nutrition.

Eastman Chemical is also committed toward maintaining a disciplined approach to capital allocation, with an emphasis on financing its dividend and debt reduction. The company returned $1.4 billion to shareholders through share repurchases and dividends during 2021.  Eastman Chemical also repaid $350 million of debt in 2021. The company also returned $98 million to its shareholders through dividends in the last reported quarter. It expects to buyback more than $1 billion of shares in 2022. Eastman Chemical also expects to generate operating cash flow of around $1.6 billion in 2022.

A Few Headwinds

Eastman Chemical faces headwinds from higher raw material, energy and distribution costs in some of its products. It saw significant headwinds from higher raw material, energy and distribution costs in the first quarter of 2022. These costs are expected to remain at the high levels in 2022.

The company is also exposed to headwinds from supply-chain disruptions, partly associated with the pandemic. It witnessed unfavorable impacts from supply chain constraints and higher logistics costs in the first quarter. Headwinds associated with supply and logistics are likely to continue to impact its second-quarter 2022 results.

The company also faces challenges from the slowdown in automotive production. The semiconductor shortage is affecting automotive production globally. The Russia-Ukraine conflict has exacerbated the chip crisis. Weaker automotive production due to component shortages is likely to affect demand in this market over the near term.

 

Eastman Chemical Company Price and Consensus

 

Eastman Chemical Company Price and Consensus
Eastman Chemical Company Price and Consensus

Eastman Chemical Company price-consensus-chart | Eastman Chemical Company Quote

 

Stocks to Consider

Better-ranked stocks worth considering in the basic materials space include Nutrien Ltd. NTR, Allegheny Technologies Inc. ATI and Cabot Corporation CBT.

Nutrien, sporting a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 169.6% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 27.5% upward over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 5.8%, on average. NTR has rallied roughly 36% in a year.

Allegheny has a projected earnings growth rate of 953.9% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 31.7% upward in the past 60 days.

Allegheny’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 128.9%, on average. ATI has gained around 8% in a year and currently sports a Zacks Rank #1.

Cabot, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 21.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 5.2% upward in the past 60 days.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 19% over a year.


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Allegheny Technologies Incorporated (ATI) : Free Stock Analysis Report
 
Eastman Chemical Company (EMN) : Free Stock Analysis Report
 
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Nutrien Ltd. (NTR) : Free Stock Analysis Report
 
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