Trading Ideas: Chemical Balance
Eastman Chemical (EMN) sells chemicals, plastics, and fibers mainly in the U.S. Coatings, adhesives, and Specialty Polymers are a few of the segments the company operates in.
Global demand for its diverse products is keeping sales and earnings growth high enough to offset a domestically weak economy. First-quarter earnings grew a robust 73%, which easily beat expectations. Its Coatings, Adhesives, and Polymers unit showed 13% growth, mostly due to higher prices.
Gross margins increased roughly 150 basis points to 20% in the first quarter and operating margins were 11%. This is a good sign since it shows the company is handling its increasing costs well. This is a primary worry among chemical companies these days.
Analysts have been busy upping their earnings estimates for the company. Over the past three months, this year’s estimates have increased 68 cents to $5.68 per share. The stock is attractively valued at less than 13x current-year estimates. We see this stock hitting the $80 level in the next year.
Suggested Stop:$69.75
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