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Eastman Chemical Gains on Cost Actions Amid Weak Demand
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We issued an updated research report on Eastman Chemical Company (EMN - Free Report) on May 27.
Eastman Chemical, a Zacks Rank #3 (Hold) stock, is benefiting from its innovation-driven growth model, aggressive cost-management actions and acquisitions amid certain challenges including a soft demand environment.
The chemical maker's shares are up 3.1% in the past year, compared with a 17.3% decline of its industry.
Eastman Chemical's cost reduction actions and growth in high-margin innovation products are expected to contribute to its earnings in 2020. The company is focused on productivity and cost-cutting actions in the wake of a challenging environment. In response to the coronavirus pandemic, the company has significantly increased its cost reduction target, which is forecast to be roughly $150 million of net savings in 2020. These cost actions include reduction of discretionary spending.
Eastman Chemical is also focused on growing new business revenues from innovation. It expects to generate roughly $500 million of new business revenues in 2020. In particular, the company’s Advanced Materials unit has a number of products that are driving new business revenues.
Moreover, Eastman Chemical remains focused on maintaining a disciplined approach to capital allocation, with an emphasis on financing its dividend and debt reduction. The company has taken steps to boost its cash flows. These include reduction of capital expenditure by around $100 million to $325-375 million. The company also expects working capital to be a source of more than $250 million of cash flows this year. Eastman Chemical also expects to reduce debt by more than $400 million in 2020.
The company is also benefiting from synergies of acquisitions. The buyout of Taminco Corporation has strengthened the company’s foothold in promising niche end-markets including food, feed and agriculture. The purchase of Marlotherm heat transfer fluids manufacturing assets in Germany also allowed the company to boost its heat transfer fluids product offerings to customers globally. Moreover, the acquisition of Spain-based cellulosic yarn producer, INACSA reinforces the growth of the company’s textiles innovation products like Naia cellulosic yarn.
However, the company is seeing weaker demand in certain markets. It witnessed soft demand across transportation and textile markets in the first quarter of 2020 due to the coronavirus outbreak, hurting its volumes in these markets. The company expects greater challenges in transportation, textiles and energy markets in the second quarter. As such, its sales volumes are expected to remain under pressure in the second quarter. The company has withdrawn its guidance for 2020 due to uncertainties surrounding the pandemic.
Eastman Chemical also faces headwind from costs associated with idling of a number of facilities and reduction of operating rates due to the pandemic. It expects to record conversion costs associated with these moves in the second quarter. This is expected to weigh on its bottom line in the quarter.
Better-ranked stocks worth considering in the basic materials space are Agnico Eagle Mines Limited (AEM - Free Report) , The Scotts Miracle-Gro Company (SMG - Free Report) and Newmont Corporation (NEM - Free Report) .
Agnico Eagle has a projected earnings growth rate of 75.3% for the current year. The company’s shares have rallied roughly 53% in a year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Scotts Miracle-Gro has an expected earnings growth rate of 17.7% for the current fiscal year. The company’s shares have gained roughly 56% in the past year. It currently carries a Zacks Rank #2 (Buy).
Newmont has a projected earnings growth rate of 82.6% for the current year. The company’s shares have surged around 86% in a year. It currently has a Zacks Rank #2.
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Eastman Chemical Gains on Cost Actions Amid Weak Demand
We issued an updated research report on Eastman Chemical Company (EMN - Free Report) on May 27.
Eastman Chemical, a Zacks Rank #3 (Hold) stock, is benefiting from its innovation-driven growth model, aggressive cost-management actions and acquisitions amid certain challenges including a soft demand environment.
The chemical maker's shares are up 3.1% in the past year, compared with a 17.3% decline of its industry.
Eastman Chemical's cost reduction actions and growth in high-margin innovation products are expected to contribute to its earnings in 2020. The company is focused on productivity and cost-cutting actions in the wake of a challenging environment. In response to the coronavirus pandemic, the company has significantly increased its cost reduction target, which is forecast to be roughly $150 million of net savings in 2020. These cost actions include reduction of discretionary spending.
Eastman Chemical is also focused on growing new business revenues from innovation. It expects to generate roughly $500 million of new business revenues in 2020. In particular, the company’s Advanced Materials unit has a number of products that are driving new business revenues.
Moreover, Eastman Chemical remains focused on maintaining a disciplined approach to capital allocation, with an emphasis on financing its dividend and debt reduction. The company has taken steps to boost its cash flows. These include reduction of capital expenditure by around $100 million to $325-375 million. The company also expects working capital to be a source of more than $250 million of cash flows this year. Eastman Chemical also expects to reduce debt by more than $400 million in 2020.
The company is also benefiting from synergies of acquisitions. The buyout of Taminco Corporation has strengthened the company’s foothold in promising niche end-markets including food, feed and agriculture. The purchase of Marlotherm heat transfer fluids manufacturing assets in Germany also allowed the company to boost its heat transfer fluids product offerings to customers globally. Moreover, the acquisition of Spain-based cellulosic yarn producer, INACSA reinforces the growth of the company’s textiles innovation products like Naia cellulosic yarn.
However, the company is seeing weaker demand in certain markets. It witnessed soft demand across transportation and textile markets in the first quarter of 2020 due to the coronavirus outbreak, hurting its volumes in these markets. The company expects greater challenges in transportation, textiles and energy markets in the second quarter. As such, its sales volumes are expected to remain under pressure in the second quarter. The company has withdrawn its guidance for 2020 due to uncertainties surrounding the pandemic.
Eastman Chemical also faces headwind from costs associated with idling of a number of facilities and reduction of operating rates due to the pandemic. It expects to record conversion costs associated with these moves in the second quarter. This is expected to weigh on its bottom line in the quarter.
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 are Agnico Eagle Mines Limited (AEM - Free Report) , The Scotts Miracle-Gro Company (SMG - Free Report) and Newmont Corporation (NEM - Free Report) .
Agnico Eagle has a projected earnings growth rate of 75.3% for the current year. The company’s shares have rallied roughly 53% in a year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Scotts Miracle-Gro has an expected earnings growth rate of 17.7% for the current fiscal year. The company’s shares have gained roughly 56% in the past year. It currently carries a Zacks Rank #2 (Buy).
Newmont has a projected earnings growth rate of 82.6% for the current year. The company’s shares have surged around 86% in a year. It currently has a Zacks Rank #2.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>