Eastman Chemical Company - Value

Eastman Chemical Company (EMN) continues to be hot as it recently posted a big beat for the second quarter as sales jumped 38% on higher volumes. Eastman is cheap, with a forward P/E of just 9.9.

Eastman manufactures specialty chemicals, polymers and specialty plastics which are used in inks, coatings, adhesives, sealants and textiles.

Eastman's Best Quarter Ever

Forget smartphones and tablet computers, chemicals are hot!

On July 29, Eastman Chemical reported second quarter results that blew by the Zacks Consensus by 23.5%. Earnings per share were $2.05 compared to the Zacks Consensus of just $1.66 per share.

The company said it was the best quarterly earnings per share results in the company's history which says something because the company was founded in 1920. That's a LOT of quarterly earnings.

The results weren't fueled simply by cost cutting either.

"The record earnings are driven by the combination of a continued rebound in demand across the company and in all regions, growth initiatives that are delivering results, and the positive impact of strategic actions that have improved our portfolio of businesses and our cost structure," said Jim Rogers, president and CEO.

Revenue rose 38% to $1.7 billion on higher volume and higher selling prices which was the result of higher raw material and energy costs. All of its segments saw revenue increases in the quarter.

The best performing segment was Performance Chemicals and Intermediates which saw sales jump 72% primarily due to higher sales volume on olefin derivative product lines.

2010 Guidance Raised Again

For the second time this year, Eastman has raised its full year guidance after surprising on quarterly estimates. It sees its positive momentum heading into the second half of the year.

The company is expected to earn between $6.20 and $6.40 per share in 2010, up from its prior range of $5.25 to $5.50.

Zacks Consensus Estimates Soar

Give the bullish earnings guidance revision, not surprisingly, analysts have adjusted their estimates higher across the board.

All 9 estimates for the third quarter have moved higher in the last week which has boosted the Zacks Consensus to $1.75 from $1.32 in that time.

Similarly, all 9 estimates have risen for the full year, as the consensus has risen to $6.47 from $5.41. This is actually higher than the company's own guidance range.

Value Fundamentals

Eastman still has attractive valuations. In addition to its low P/E, it has a price-to-book ratio of 2.8 which is inline with the industry.

The company also has a price-to-sales ratio of just 0.8, under the industry average of 1.0.

Eastman rewards shareholders with a not-to-shabby dividend of 2.8%.

Eastman Chemical is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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