The following excerpts explain why Zacks senior chemical industry analyst Paul Raman, CFA has issued a Hold rating on Eastman Chemical Company (EMN), the chemical and plastic manufacturer:
'Eastman has a strong fibers business and solid financials, plus a potential PET restructuring. However, a lack of free cash flow, PET capacity increases coupled with slowing growth, and PET industry overcapacity with higher raw material costs force us to rate the stock a hold with a target of $66.
'On October 25, 2007, Eastman reported third quarter results. Earnings were $1.26, higher than the $1.24 last year. Sales were $1.81 billion, down from $1.96 billion last year. Sales were flat ex-divestitures. Fibers sales were up 14%, while they declined 17% for PET. The company expects flat earnings in the fourth quarter.
'Currently, Eastman is valued at 13.7x our 2007 earnings estimate of $4.80 per share. Eastman has a strong fibers business and solid financials, plus a potential PET restructuring. However, a lack of free cash flow, PET capacity increases coupled with slowing growth, and PET industry overcapacity with higher raw material costs force us to rate the stock a Hold with a target of $66. This is 13.7x our 2007 earnings estimate.'
Read the full analyst report on EMN.
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