We came across a bullish thesis on Eastman Chemical Company (NYSE:EMN) on Safe Harbor Stocks’ Substack by Kristopher Rymer. In this article, we will summarize the bulls’ thesis on EMN. Eastman Chemical Company (NYSE:EMN)’s share was trading at $88.65 as of Jan 6th. EMN’s trailing and forward P/E were 11.88 and 10.19 respectively according to Yahoo Finance.
A team of scientists in a laboratory observing the sophisticated engineering of specialty chemicals.
Eastman Chemical Company is positioning itself as a leader in the circular economy, with a strong focus on sustainability through its advanced recycling technologies like Carbon Renewal Technology (CRT) and Polyester Renewal Technology (PRT). These technologies, which enable the conversion of plastic waste into high-quality products, reflect Eastman’s commitment to addressing the global plastic waste crisis, where only a small fraction of the 360 million metric tons of plastic waste produced annually is recycled. Through these innovations, Eastman is not only contributing to reducing environmental impact but also driving growth in several key markets, such as consumer durables, textiles, and packaging.
The company is on track for significant growth through strategic investments in new recycling facilities in Tennessee, Texas, and France. These plants, particularly the world’s largest methanolysis facility in Kingsport, Tennessee, are expected to generate over $500 million in EBITDA by 2029, with strong returns on invested capital (ROIC). By leveraging molecular recycling, Eastman can produce high-quality recycled PET that commands a premium in the market, positioning the company for a more sustainable and profitable future.
Eastman’s product portfolio is diversified, with a clear focus on sustainability-driven markets. Its products, including Tritan™ Renew and Naia™ Renew, are made with molecularly recycled feedstocks and serve high-growth markets such as consumer goods, textiles, and packaging. The company’s commitment to sustainability is reflected in its strategic growth initiatives, with plans to generate substantial EBITDA through new facilities like the Longview, Texas plant, which is expected to generate at least $150 million of EBITDA at full capacity.
Financially, Eastman is on a recovery trajectory, with EBIT margins improving and EBITDA projected to grow at a compound annual growth rate (CAGR) of 8.3% through 2029. The company has maintained a solid track record of shareholder returns, including a 15-year streak of dividend increases and 2.5% annual share buybacks, reflecting its commitment to returning value to investors. Despite some challenges in recent years, Eastman’s diversified business model and strategic investments in sustainable technologies position the company for long-term growth and profitability.
With an 8.6% free cash flow yield and an attractive dividend yield of 3.28%, Eastman offers investors compelling value. As the company continues to capitalize on its leadership in the circular economy and expand its presence in high-growth markets, it is well-positioned to drive both sustainability and financial performance over the coming years.
Eastman Chemical Company (NYSE:EMN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held EMN at the end of the third quarter which was 28 in the previous quarter. While we acknowledge the risk and potential of EMN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EMN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.