On Monday, Eastman Chemical (NYSE:EMN) stock received an upgraded rating from Jefferies, moving from Hold to Buy. Accompanying the rating change, the firm also increased its price target to $125 from the previous $102. The upgrade is based on several key factors that indicate a positive outlook for the chemical company's financial performance.
The firm's analyst pointed out that Eastman Chemical is expected to produce above-trend earnings per share (EPS) growth, achieve higher margins, and deliver better return on invested capital (ROIC) over the next three years. This optimistic stance is also supported by the belief that the company's 2024 forecast is modest, especially regarding volume projections.
Additionally, Eastman Chemical is anticipated to benefit significantly from operating leverage due to restocking in the durables, electronics, and packaging sectors. The analyst also noted that the company's investments in circularity, which focus on sustainability and recycling, are likely to contribute approximately $3.50 to EPS by 2029-2030.
Moreover, the firm forecasts that Eastman Chemical will generate free cash flow (FCF) of $7.50 per share between 2024 and 2026. This strong cash flow is expected to support a dividend yield of 3.7% and potentially enable the company to return up to roughly 20% to shareholders through buybacks or engage in similar mergers and acquisitions activities. This financial maneuvering underscores the firm's confidence in Eastman Chemical's capacity to reward its shareholders in the forthcoming years.
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