Did Eastman Chemical Company (EMN) Soar in Q1?

We recently compiled a list of the 9 Best Plastics and Rubber Stocks to Buy. In this article, we are going to take a look at where Eastman Chemical Company (NYSE:EMN) stands against the other plastic and rubber stocks.

The global plastics and rubber products market is expected to observe consistent growth in the coming years. The market is expected to expand from $1.46 trillion in 2023 to $1.57 trillion in 2024, reflecting a healthy 7.3% annual growth rate. This positive trend is predicted to continue, with the market reaching a projected size of $2.05 trillion by 2028 at a 6.9% annual growth rate.

Several factors are fueling this growth, including the rise of manufacturing and advancements in the medical and healthcare sectors. The growing demand for tires in the automotive industry is also boosting the market. Tires, which are important for providing traction and supporting vehicle weight, depend significantly on rubber as a primary material.

For instance, a February 2023 report by the US Tire Manufacturers Association (USTMA) shared that tire shipments in the US are on an upward trajectory, rising from 332 million units in 2021 to 332.7 million units in 2022.

Recent trends in the US plastics and rubber product manufacturing sector highlight a rise in research and development (R&D) investment. Data collected by Source Advisors indicates a 19.4% increase in R&D compared to the previous year, signaling strong growth in innovation activities. The sector has invested a total of $3.1 billion in R&D, an increase from $2.6 billion the previous year. This rise in investment is double the US average for the same period.

This increase in R&D investment comes as a positive sign following a 5-year period characterized by a slump in innovation. During the slump, R&D investment in the industry declined by 16.2%. This trend has occurred in response to the evolving technological landscape and shifting consumer expectations, especially toward sustainable solutions.

Many popular companies have introduced innovative solutions through R&D efforts. For instance, Berry Global recently launched a new version of its Omni Xtra polyethylene (PE) cling film, specifically designed for fresh food applications. This innovative film serves as an alternative to traditional polyvinyl chloride (PVC) cling films and builds upon the success of the existing Omni Xtra film used in packaging various food products.

With this context in mind, let's take a look at some of the best plastics and rubber stocks attracting investment currently.

Our Methodology

For this article, we conducted an analysis of our database of 919 hedge funds as of Q1 2024. From this dataset, we selected the best plastics and rubber stocks based on the hedge fund sentiment. The top plastics and rubber stocks have been ranked in ascending order of the number of hedge funds holding a stake in them as of the first quarter of the year. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A close-up of a chemist in a white lab coat, mixing raw materials for specialty products.

Eastman Chemical Company (NYSE:EMN)

Number of Hedge Fund Holders: 33

Eastman Chemical Company (NYSE:EMN) is a prominent global specialty chemicals company with operations spanning various industries, including coatings, additives, and advanced materials. Headquartered in Kingsport, Tennessee, the company has a diverse portfolio of products and solutions to meet the needs of a wide range of end markets, from automotive to construction.

In Q1 2024, Eastman Chemical Company (NYSE:EMN) recorded a sequential rise in sales volume and earnings. This was due to the renewed demand for specialty products within its Advanced Materials and Additives & Functional Products divisions.

The company’s EBIT increased from $246 million in Q1 2023 to $263 million in Q1 2024. Meanwhile, earnings per diluted share increased from $1.12 in the first quarter of 2023 to $1.39 during Q1 2024.

Analysts' price targets for the stock range from $94 to $128. The average price target of $109.3 implies an upside potential of over 10% from the current price levels. While some analysts suggest holding the stock, the majority (9 out of 18) have given it a “Buy” rating and 2 have given it a “Strong Buy” rating.

Here’s what ClearBridge Investments said about Eastman Chemical Company (NYSE:EMN) in its Q2 2023 investor letter:

“We also added a new position in Eastman Chemical Company (NYSE:EMN), a vertically integrated chemical company, reflecting an opportunity to buy an overly depressed cyclical stock with an extremely cheap option on molecular recycling. An eventual cyclical rebound alone is enough to justify a much higher business value as demand will accelerate as destocking ends, allowing Eastman to realize material profit margin expansion as it gets ahead of cost input inflation. Additionally, Eastman is ramping up three molecular recycling plants over the next few years based on its Polyester Renewal Technology, a less energy intensive and lower cost production process. This should drive faster growth while generating compelling returns on capital.”

Overall EMN ranks 6th on our list of the best plastic and rubber stocks to buy. You can visit 9 Best Plastics and Rubber Stocks to Buy to see the other plastic and rubber stocks that are on hedge funds’ radar. While we acknowledge the potential of EMN as an investment, our conviction lies in the belief that 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.

 

READ NEXT: Analyst Sees a New $25 Billion "Opportunity" for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.

 

Disclosure: None. This article is originally published at Insider Monkey.