Eastman Chemical (EMN) Stocks Up 12% in 3 Months: Here’s Why

Eastman Chemical CompanyESM shares are up 12.5% in the last three months. During the same period, the company also outperformed its industry’s growth by 0.4%.

The chemical manufacturer has a market capitalization of approximately $9.3 billion, with average trading volume over the past three months of approximately $1,659.50 per share.

Let’s take a look at the factors driving this Zacks Rank #3 (Hold) stock.

What speaks in favor of ESM?

Better-than-expected results in the first quarter of 2020 and good prospects contributed to the increase in the company’s share prices. Eastman Chemical’s first-quarter earnings rose 23% year over year to $258 million, or $1.89 per share. Adjusted earnings per share of $2.03 increased from $1.77 in the year-ago quarter and surpassed the Zacks Consensus Estimate of $1.72.

Eastman Chemical benefits from its cost management efforts, innovation-led growth model and acquisition synergies in a challenging business environment. Cost reduction efforts and the development of high-margin innovative products are expected to contribute to the company’s profits in 2020.

In the face of a demanding environment, the company is focusing on activities related to productivity and cost reduction. In response to the coronavirus pandemic, it significantly raised its cost reduction target, which is projected to amount to approximately $150 million in net savings in 2020. Cost actions include reducing discretionary spending.

Additionally, Eastman Chemical is focused on driving new business revenues from innovation. It expects to generate approximately $500 million in new operating revenue in 2020. In particular, the company’s Advanced Materials division offers a range of products that generate new business revenues.

Eastman Chemical also benefits from acquisition synergies. The acquisition of Marlotherm’s heat transfer fluid manufacturing assets in Germany has enabled the company to expand its heat transfer fluid product offering to customers worldwide. Moreover, the acquisition of Spanish cellulose yarn producer, INACSA, strengthens the development of the company’s innovative textile products such as Naia cellulose yarn.

Additionally, Eastman Chemical remains focused on maintaining a disciplined approach to capital allocation, with particular emphasis on dividend financing and debt reduction. It expects to reduce debt by more than $400 million in 2020. The company has also taken steps to increase cash flow. These include a reduction in capital expenditure of approximately $100 million to $325 million to $375 million. The company also expects working capital to generate more than $250 million in cash flow this year.

Eastman Chemical Company Price and Consensus

Eastman Chemical Company Price Consensus Chart | Quote from Eastman Chemical Company

Stocks to consider

Better performing stocks in the basic materials space include Agnico Eagle Mines Limited AEM, The Scotts Miracle-Gro Company SMG and Barrick Gold Corporation GOLD.

Agnico Eagle forecasts a 75.3% earnings growth rate for the current year. The company’s shares are up about 42% over the year. It currently carries a Zacks Rank #1 (Strong Buy). You can see complete list of today’s Zacks #1 ranked stocks here.

Scotts Miracle-Gro’s expected earnings growth rate for the current fiscal year is 17.7%. The company’s stock has gained about 57% over the past year. It currently carries a Zacks Rank #2 (Buy).

Barrick Gold’s projected earnings growth rate for the current year will be 64.7%. The company’s shares are up about 89% over the year. It currently carries a Zacks Rank #2.

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