Eastman Chemical Company (EMN): This Chemical Business Is Relatively Cheap

In the first quarter 2013, Ecolab Inc. (NYSE:ECL) experienced strong earnings results. Its adjusted EPS came in at $0.60 per share, growth of 20% excluding the special gains and other charges. Recently, Ecolab has planned for cost savings initiatives and a restructuring in the energy market. The company expects to generate around $25 million in cost synergies this year, with the annual cost synergies of $150 million by the end of 2015. For full-year 2013, Ecolab Inc. (NYSE:ECL) anticipates that its EPS will be around $3.45 to $3.55, including the effect of the Champion acquisition.

E I Du Pont De Nemours And Co (NYSE:DD) is also has a higher valuation than Eastman Chemical. At $52.70 per share, DuPont is worth nearly $50 billion in market cap. The market values DuPont at nearly 8.1 times its forward EV/EBITDA. DuPont has been trying to strengthen its three strategic priorities, including agriculture and nutrition, bio-based industrial and advanced materials.

Since 2009, E I Du Pont De Nemours And Co (NYSE:DD) has had higher cash returns and a higher growth business with the acquisition of Danisco, Solae and MECS sulfuric acid technology. These acquisitions have generated around $3.5 billion in sales for the company. Moreover, DuPont also exited its slower-growth businesses, such as performance coatings and liquid packaging systems, which generated lower cash returns.

In the long run, the company expects to have around 7% compounded annual growth in sales and 12% growth in operating EPS. For full-year 2013, DuPont expects to pay investors a $1.78 dividend per share, 4.7% higher than the dividend of $1.70 per share in 2012.

My Foolish take

Eastman Chemical Company (NYSE:EMN) seems to be a decent buy at its current trading price due to the relatively low valuation compared to its chemical peers, including DuPont and Ecolab. Moreover, the company could take advantage of low borrowing costs for its acquisition and its operations. According to Barron’s, with a $8.00 EPS forecast, the simple 12 P/E ratio could value Eastman Chemical at $96 per share, a 35% premium to its current trading price.

The article This Chemical Business Is Relatively Cheap originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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