Eastman Chemical Company (NYSE:EMN)’s EMN shares have popped 23.9% over the past six months. The chemical maker has also outperformed its industry’s rise of 20.3% over the same time frame. Moreover, it has topped the S&P 500’s 15.4% rise over the same period.
Let’s take a look into the factors that are driving this Zacks Rank #2 (Buy) stock.
What’s Going in EMN’s Favor?
Solid first-quarter earnings performance and upbeat prospects have contributed to the rally in Eastman Chemical’s shares. Its adjusted earnings of $2.13 per share for the first quarter topped the Zacks Consensus Estimate of $2.03. Revenues of $2,409 million also beat the Zacks Consensus Estimate of $2,335.6 million. The company gained from its innovation-driven growth model, operational execution and cost-management actions in the quarter.
Eastman Chemical, on its first-quarter call, said that it is seeing continued momentum in the second quarter as it gains from innovation, strong market recovery and lower operating costs from its operations transformation program. It expects adjusted earnings per share of between $8.25 and $8.75 for 2021.
Earnings estimates for Eastman Chemical have also been going up over the past two months. The Zacks Consensus Estimate for 2021 has increased around 10% while the same for second-quarter 2022 has gone up 17.6%. The favorable estimate revisions instill investor confidence in the stock.
Eastman Chemical is seeing higher demand across building & construction, transportation and consumer durables markets. Continued strength in these markets is expected to drive its sales volumes in 2021. The company also remains focused on growing new business revenues from innovation.
Moreover, the company is taking an aggressive approach to cost management in the wake of the pandemic. These initiatives include reduction of discretionary spending. The company reduced costs by roughly $150 million in 2020. It is also on track with its cost-cutting actions in 2021, which are expected to contribute to its earnings per share. The company expects to benefit from lower operating costs from its operational transformation program in the second quarter of 2021.
Eastman Chemical also remains committed to maintaining a disciplined approach to capital allocation, with an emphasis on financing its dividend and debt reduction. The company returned $418 million to shareholders through share repurchases and dividends during 2020. The company also returned $134 million to its shareholders through dividends and share repurchases during the first quarter. It expects to buyback shares worth roughly $350 million in 2021. Eastman Chemical also anticipates free cash flow to approach $1.1 billion for 2021.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation (NYSE:NUE) NUE, Cabot (NYSE:CBT) Corporation CBT and Impala Platinum (OTC:IMPUY) Holdings Limited IMPUY.
Nucor has a projected earnings growth rate of 229.3% for the current year. The company’s shares have rallied around 132% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cabot has an expected earnings growth rate of around 126% for the current fiscal. The company’s shares have surged 64% in the past year. It currently sports a Zacks Rank #1.
Impala Platinum has an expected earnings growth rate of 225.2% for the current fiscal. The company’s shares have surged around 165% in the past year. It currently carries a Zacks Rank #2.
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