Eastman Chemical (EMN) Downgraded To Hold: Find Out Why

Tennessee-based Chemical maker Eastman Chemical (NYSE:EMN) was downgraded to a Zacks Rank #3 (Hold) on May 24. The company recorded earnings of $278 million or $1.89 per share in the first quarter of 2017, higher than the year-ago figure of $251 million or $1.69.

Barring one-time items, earnings were $1.83 per share for the quarter that topped the Zacks Consensus Estimate of $1.74 per share.

Revenues rose around 2.9% year over year to $2.3 billion, beating the Zacks Consensus Estimate of $2.24 billion.

Eastman Chemical remains focused on cost-cutting and productivity actions amid a challenging operating environment, which are expected to contribute around 50 cents to earnings per share in 2017. Further, the company expects adjusted earnings per share to grow 8–12% in the year.

Eastman Chemical is also expected to gain from strategic acquisitions and capacity expansion actions. Moreover, the company remains committed to reduce debt and boost shareholders returns, leveraging healthy free cash flows. In 2017, it expects to generate solid free cash flow and return around $650 million to its shareholders.

Eastman Chemical’s shares have gained 5.9% in the last six months, underperforming the Zacks categorized Chemicals-Diversified industry’s gain of 9.1%.

However, pricing pressure continues to hurt the company’s top-line. Challenging global economic conditions are affecting some of the company’s businesses. The company sees volume pressure in the Fibers business in first-half 2017 and a roughly 25% decline in earnings for the unit for full-year 2017. The company also faces currency translation risks given a strong U.S. dollar.

Eastman Chemical has witnessed four downward and three upward revisions for current quarter earnings over the past 30 days. However, the Zacks Consensus Estimate for second-quarter 2017 has remained stable at $1.89, over the past 30 days.

Eastman Chemical Company Price and Consensus

Eastman Chemical Company Price and Consensus | Eastman Chemical Company Quote

Stocks to Consider

Some better-ranked companies in the chemical space include BASF SE (OTC:BASFY) , The Chemours Company (NYSE:CC) and Kronos Worldwide Inc (NYSE:KRO) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BASF has expected long-term growth of 8.6%.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

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