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Reasons Why You Should Hold Eastman Chemical Stock in Your Portfolio
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Key Takeaways
Eastman Chemical Company stands to benefit as innovation and cost-cutting efforts help defray demand weakness.
EMN stock is down more than 10% the past six weeks, compared to the industry's decline of 11.3%.
The chemicals industry has been hit by weakening construction, consumer electronics and durables demand.
Eastman Chemical Company (EMN - Free Report) benefits from its innovation-driven growth model and cost-cutting and productivity actions amid headwinds from demand weakness in specific markets.
EMN stock is down 10.7% over the past six months compared with the Zacks Chemicals Diversified industry’s decline of 11.3%.
Image Source: Zacks Investment Research
Let’s find out why EMN stock is worth retaining at the moment.
Eastman Chemical Gains on Innovation & Cost Actions
Eastman aims to increase new business revenues by utilizing its innovation-driven growth strategy. Innovation and market development initiatives are expected to support its sales volumes. Its specialty portfolio is expected to drive sales growth across key end markets such as consumer durables, building & construction and transportation.
The company is also expected to gain from the revenues and earnings generated by its Kingsport methanolysis facility. It anticipates a $20-$30 million of incremental EBITDA contribution from the Kingsport facility on a year-over-year basis for full-year 2024.
Eastman is also benefiting from its actions to manage costs. It is expected to benefit from lower operating costs from its operational transformation program. EMN is taking action to keep its manufacturing and administrative costs in control. Pricing initiatives and lower raw material and energy costs are also expected to support the company’s bottom line. The company plans to maintain pricing discipline and improve asset utilization.
Eastman Chemical also remains focused on maintaining a disciplined approach to capital allocation with an emphasis on debt reduction. EMN, last month, announced an increase in its quarterly cash dividend to 83 cents from 81 cents per share of common stock. The hike reflects the board's confidence in EMN's steady earnings performance and strong cash flow generation. This also marks the 15th consecutive year of dividend hike for the company. EMN also expects to repurchase shares worth around $300 million for 2024. It expects to deliver around $1.3 billion in operating cash flow for full-year 2024.
Weak Demand a Concern for EMN Stock
Eastman Chemical faces challenges from weak demand in certain markets. It is seeing soft demand in building & construction and cautious customer behavior in consumer durables and electronics. Demand in building & construction remains sluggish in most regions.
While EMN is seeing an end of customer inventory de-stocking across most of its end markets, the same is expected to continue in medical applications over the near term. Weaker demand is expected to adversely impact its performance in the fourth quarter of 2024.
Carpenter Technology beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 14.1%. CRS’ shares have soared 175% in the past year.
The Zacks Consensus Estimate for ICL Group’s current-year earnings has increased by 2.9% in the past 60 days. ICL beat the consensus estimate in each of the last four quarters with the average surprise being 18.1%.
ATI beat the consensus estimate in three of the last four quarters while missing once. In this time frame, it has delivered an earnings surprise of roughly 3.7%, on average. ATI has gained around 28% in the past year.
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Reasons Why You Should Hold Eastman Chemical Stock in Your Portfolio
Key Takeaways
Eastman Chemical Company (EMN - Free Report) benefits from its innovation-driven growth model and cost-cutting and productivity actions amid headwinds from demand weakness in specific markets.
EMN stock is down 10.7% over the past six months compared with the Zacks Chemicals Diversified industry’s decline of 11.3%.
Image Source: Zacks Investment Research
Let’s find out why EMN stock is worth retaining at the moment.
Eastman Chemical Gains on Innovation & Cost Actions
Eastman aims to increase new business revenues by utilizing its innovation-driven growth strategy. Innovation and market development initiatives are expected to support its sales volumes. Its specialty portfolio is expected to drive sales growth across key end markets such as consumer durables, building & construction and transportation.
The company is also expected to gain from the revenues and earnings generated by its Kingsport methanolysis facility. It anticipates a $20-$30 million of incremental EBITDA contribution from the Kingsport facility on a year-over-year basis for full-year 2024.
Eastman is also benefiting from its actions to manage costs. It is expected to benefit from lower operating costs from its operational transformation program. EMN is taking action to keep its manufacturing and administrative costs in control. Pricing initiatives and lower raw material and energy costs are also expected to support the company’s bottom line. The company plans to maintain pricing discipline and improve asset utilization.
Eastman Chemical also remains focused on maintaining a disciplined approach to capital allocation with an emphasis on debt reduction. EMN, last month, announced an increase in its quarterly cash dividend to 83 cents from 81 cents per share of common stock. The hike reflects the board's confidence in EMN's steady earnings performance and strong cash flow generation. This also marks the 15th consecutive year of dividend hike for the company. EMN also expects to repurchase shares worth around $300 million for 2024. It expects to deliver around $1.3 billion in operating cash flow for full-year 2024.
Weak Demand a Concern for EMN Stock
Eastman Chemical faces challenges from weak demand in certain markets. It is seeing soft demand in building & construction and cautious customer behavior in consumer durables and electronics. Demand in building & construction remains sluggish in most regions.
While EMN is seeing an end of customer inventory de-stocking across most of its end markets, the same is expected to continue in medical applications over the near term. Weaker demand is expected to adversely impact its performance in the fourth quarter of 2024.
Eastman Chemical Company Price and Consensus
Eastman Chemical Company price-consensus-chart | Eastman Chemical Company Quote
EMN’s Zacks Rank & Other Key Picks
EMN currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the Basic Materials space are Carpenter Technology Corporation (CRS - Free Report) , ICL Group Ltd (ICL - Free Report) and ATI Inc. (ATI - Free Report) . While CRS sports a Zacks Rank #1 (Strong Buy), both ICL and ATI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 14.1%. CRS’ shares have soared 175% in the past year.
The Zacks Consensus Estimate for ICL Group’s current-year earnings has increased by 2.9% in the past 60 days. ICL beat the consensus estimate in each of the last four quarters with the average surprise being 18.1%.
ATI beat the consensus estimate in three of the last four quarters while missing once. In this time frame, it has delivered an earnings surprise of roughly 3.7%, on average. ATI has gained around 28% in the past year.