Eastman Inks Deal With PVP, Expands Reach With Start-ups

Eastman Chemical Company (NYSE:EMN) recently announced that it has entered into a partnership with Phoenix Venture Partners LLC (PVP) through an investment in new venture capital fund, PVP II LP. The investment will drive Eastman Chemical’s external innovation reach beyond the academic alliances into start-up ventures. However, the specific terms of the transactions were not disclosed.

PVP is a leading venture capital firm recognized by corporations and entrepreneurs across the globe. The company is focused on Advanced Materials and forges deep partnerships with strategic investors. By working closely with their partners, PVP identifies attractive market opportunities.

The company expects to leverage PVP’s knowledge of the Advanced Materials venture sector, scouting capabilities and deal flows to identify and work collaboratively with start-ups and thereby bring in innovative technology in the market.

According to Managing General Partner of PVP, Dr. John T. Chen, Eastman chemical’s access to state-of-the-art technologies, in-depth understanding of markets and technologies makes it an ideal innovation partner. Through its portfolio, Eastman can leverage collaboration with start-ups in sectors such as Advanced Materials, Functional and Additives Products Businesses. This will help the company to accelerate innovation, connect with global entrepreneurs and deliver value.

Eastman Chemical’s shares have declined 3.7% in the last three months, underperforming the Zacks categorized Chemicals-Diversified industry’s gain of 2.8%.

Eastman Chemical remains focused on cost-cutting and productivity actions amid a challenging operating environment. The company 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.

Eastman Chemical should also gain from its strategic acquisitions. The acquisition of Solutia represents a significant step in the company’s strategy to boost its presence in the emerging markets. In particular, it should significantly accelerate Eastman Chemical’s growth efforts and offer excellent growth opportunities in Asia Pacific. The company expects to realize significant tax benefits from the acquisition.

Moreover, Eastman Chemical is seeing strong adoption of the Tritan copolyester product line, which is poised to be a major contributor to the company’s future growth. The product is approaching $300 million in annual sales since its launch in 2007. The company is doubling Tritan capacity at its Kingsport facility to boost growth.

Eastman Chemical currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other top ranked companies in the basic materials space include Kronos Worldwide Inc (NYSE:KRO) , ArcelorMittal (NYSE:MT) and Methanex Corporation (NASDAQ:MEOH) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

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

ArcelorMittal has an expected long-term earnings growth of 11.4%.

Methanex has an expected long-term earnings growth of 15%.

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