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Why You Should Retain Eastman Chemical (EMN) in Your Portfolio

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

Shares of this leading chemical maker are up 28.8% in a year compared with the 21.8% rise of its industry.

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

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

What’s Aiding EMN?

Eastman Chemical is benefiting from cost cutting and productivity actions. It is undertaking a more aggressive approach to keep manufacturing costs in control. It is on track with its cost-cutting actions in 2021, which are expected to contribute to its earnings per share. Eastman Chemical is expected to benefit from lower operating costs from its operational transformation program.

The company is also focused on generating new business revenues from innovation. It is investing around $250 million over 2021-2022 to construct one of the biggest plastic-to-plastic molecular recycling facilities in the world. The company expects $600 million of new business revenues from innovation in 2021. Eastman Chemical will also likely gain from its strategic acquisitions and end-market recovery.

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 $328 million to shareholders through dividend payouts and share repurchases during second-quarter 2021. It expects to buyback shares worth roughly $250 million in the second half of this year. Eastman Chemical also anticipates free cash flow to exceed $1.1 billion for 2021.

A Few Worries

Eastman Chemical faces headwinds from higher raw material, energy, and distribution costs in some of its products. It witnessed unfavorable impacts from supply chain constraints and higher logistics costs in the second quarter. Headwinds associated with supply and logistics are likely to continue to impact its third-quarter results.

The slowdown in automotive production due to the semiconductor shortage is another concern. The chip shortage is affecting automotive production globally. The shortage, partly caused by the impacts of the coronavirus pandemic, is disrupting production of parts and vehicles as well as affecting all major automotive original equipment manufacturers. This is likely to affect demand in the 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

Some better-ranked stocks worth considering in the basic materials space include The Mosaic Company MOS, United States Steel Corporation X, and Olympic Steel, Inc. ZEUS, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mosaic has an expected earnings growth rate of 471.8% for the current year. The stock has also rallied around 78% over a year.

U.S. Steel has a projected earnings growth rate of 368.9% for the current year. The company’s shares have shot up around 200% in a year.

Olympic Steel has an expected earnings growth rate of 2,362.2% for the current year. The company’s shares have rallied around 94% in the past year.

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United States Steel Corporation (X) : Free Stock Analysis Report

Eastman Chemical Company (EMN) : Free Stock Analysis Report

The Mosaic Company (MOS) : Free Stock Analysis Report

Olympic Steel, Inc. (ZEUS) : Free Stock Analysis Report

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