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Eastman Chemical Poised on Cost & Debt Cuts Amid Headwinds

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On Apr 4, we issued an updated research report on chemical maker, Eastman ChemicalEMN .

Eastman Chemical's diversified chemical portfolio remains its strength. The company remains committed to improve its cost position and boost productivity. It is also benefiting from synergies of acquisitions and capacity expansion initiatives.

Eastman Chemical outperformed the Zacks categorized Chemicals-Diversified industry over the past six months, partly attributable to its forecast-topping earnings performance in the last two quarters. The company's shares have gained around 18.6% over this period, compared with roughly 13.8% gain recorded by the industry. The company is gaining from its cost management actions and growth of its high-margin products.

Eastman Chemical remains focused on cost cutting and productivity actions amid a challenging operating environment. The company delivered around $100 million of costs savings for full-year 2016. Eastman Chemical also expects to deliver an additional $100 million of cost savings in 2017. Its cost reduction actions are expected to contribute around 50 cents to earnings per share in 2017.

In addition, Eastman Chemical remains committed to reduce debt and boost shareholder returns. The company reduced its net debt by more than $400 million in 2016. Its total debt fell roughly 6% year over year to $6.6 billion at the end of 2016.

Moreover, the company has hiked its quarterly dividend for the seventh consecutive year. Eastman Chemical returned more than $400 million to shareholders during 2016 leveraging healthy free cash flows. The company generated over $900 million of adjusted free cash flows in 2016. The company also expects to deliver strong earnings growth and generate solid free cash flow in 2017.

Eastman Chemical is also gaining from synergies of acquisitions, especially Taminco Corporation. The Taminco acquisition has provided attractive cost and revenue synergy opportunities.

However, the company faces pricing pressure across most of its business segments as witnessed in the last reported quarter. Lower prices weighed on its top line in the quarter. The company is seeing competitive pressure, especially from the Asia Pacific region, which is hurting prices.

Eastman Chemical also faces currency translation risks given a stronger U.S. dollar vis-à-vis a basket of currencies. Its revenues remain exposed to unfavorable currency swings. The company also faces headwind from challenging global economic conditions.

Eastman Chemical currently carries a Zacks Rank #3 (Hold).

Eastman Chemical Company Price and Consensus

Eastman Chemical Company Price and Consensus | Eastman Chemical Company Quote

Stocks to Consider

Better-placed companies in the chemicals space include The Chemours Company CC , Kronos Worldwide, Inc. KRO and Sinopec Shanghai Petrochemical Company Limited SHI , all holding a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Chemours has an expected long-term growth of 15.5%.

Kronos has an expected long-term growth of 5%.

Sinopec Shanghai has an expected long-term growth of 14.2%.

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Eastman Chemical Company (EMN): Free Stock Analysis Report

Kronos Worldwide Inc (KRO): Free Stock Analysis Report

SINOPEC Shangai Petrochemical Company, Ltd. (SHI): Free Stock Analysis Report

Chemours Company (The) (CC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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