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Eastman Chemical Company EMN is benefiting from cost-cutting and productivity actions as well as its innovation-driven growth model amid challenges from soft demand in certain markets.
Shares of EMN are up 22.8% over the past year compared with the Zacks Chemicals Diversified industry’s rise of 4.4%.
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Let’s find out why EMN stock is worth retaining at the moment.
Eastman Chemical Gains on Cost Actions & Innovation
Eastman is gaining from its actions to manage costs. It is expected to benefit from lower operating costs from its operational transformation program in 2024.
EMN is taking action to keep its manufacturing and administrative costs in control. It achieved cost savings of around $200 million in 2023, net of inflation. Pricing initiatives and lower raw material and energy costs are also expected to support the company’s bottom line. The company plans to maintain pricing discipline and improve asset utilization throughout 2024.
Eastman aims to increase new business revenues by utilizing its innovation-driven growth strategy. Innovation and market development initiatives are expected to support its sales volumes. Its specialty portfolio is expected to drive sales growth across key end markets such as consumer durables, building & construction and transportation.
The company is also expected to gain from the revenues and earnings generated by its Kingsport methanolysis facility in 2024. It anticipates a $20-$30 million of incremental EBITDA contribution from the Kingsport facility on a year-over-year basis.
Eastman Chemical also remains focused on maintaining a disciplined approach to capital allocation with an emphasis on debt reduction. It returned $526 million to shareholders in 2023 through dividends and share repurchases. It also raised its dividend for the 14th consecutive year. EMN expects to repurchase shares worth around $300 million in 2024. It expects to deliver around $1.3 billion in operating cash flow in 2024.
Demand Weakness a Concern for EMN Stock
EMN is exposed to headwinds from weak demand in certain markets. It is seeing soft demand in building & construction and cautious customer behavior in consumer durables and electronics. Demand in building & construction remains sluggish in most regions.
While Eastman Chemical is seeing an end of customer inventory de-stocking across most of its end markets, the same is expected to continue in medical applications over the near term. Weaker demand is expected to adversely impact its performance in the fourth quarter of 2024.