On Monday, Citi increased its price target for Eastman Chemical (NYSE:EMN) shares, lifting it to $115 from $111, while sustaining a Buy rating for the stock. The adjustment follows the company's recent earnings call, where Eastman Chemical outlined several key developments expected to influence its financial performance in the upcoming fiscal year.
The company anticipates that its Kingsport methanolysis facility will enhance its EBITDA by approximately $50 million in FY24. Despite some operational challenges that have kept the facility's operating rates around 70%, the company is working to improve these rates. The full benefits are expected to materialize in the third and fourth quarters of 2024, which should also contribute to a reduction in fixed costs per unit.
Eastman Chemical also reported a positive shift in the performance of its Tritan product line. After facing destocking headwinds in FY23, the company experienced relief in the first half of 2024, thanks to new volume wins attributed to its value proposition. The company managed to maintain its consumer base and attract new accounts, despite ongoing macroeconomic pressures.
Regarding overall market demand, Eastman Chemical noted that primary demand remained subdued in the first half of 2024, consistent with levels seen in FY23. However, the lack of destocking has partially driven volume improvements. The company remarked that while the weakness in durable goods persists, the situation is not deteriorating further.
This earnings call has provided a snapshot of Eastman Chemical's current operations and future expectations, leading to Citi's decision to raise the price target on the company's stock. The new target reflects a modest increase but indicates a positive outlook for the chemical manufacturer's financial trajectory.
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