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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