Eastman Chemical Company (NYSE:EMN), another peer in the industry, acquired Solutia for approximately $4.8 billion. The acquisition will establish a diverse and sustainable portfolio for Eastman and expand its geographical outreach in emerging markets. It will strengthen the company’s position as a top-tier specialty chemical supplier.
This transaction will increase the sales revenue and profit margins of the company. Moreover, Eastman will be able to generate a solid return on its capital and contribute towards strong cash flow generation. It is also expected that the above transaction will be accretive to the company’s earnings.
Eastman has also expanded its Therminol 66 plant capacity in Wales, which increases the plant’s capacity by 50%. The demand for Therminol 66 fluid is increasing in oil and gas and polymers markets. Hence, this increase in capacity will boost the sales of the company.
Final words
FMC Corp (NYSE:FMC) has a very sound financial position, unlike its competitors, due to its diversified revenue base. The revenue of the company grew at a rate of 6.3% while per share earnings grew at a rate of 20.5% over the last three years. The dividends announced for investors have been increasing year on year since the company started paying a dividend. Its margins are considerably higher than the industry average, and the debt profile is also better than its industry peers. Due to the recent acquisition, the company’s profitability will further improve making this stock more attractive for the investors. So, I recommend this stock as a strong buy.
Praxair, Inc. (NYSE:PX) has a stable financial position. The company’s EPS has been growing at a rate of 13.4%. Its dividend has also increased year on year. Its recent approaches to achieve deeper market penetration will add huge profits to its income statement due to the bright future outlook for industrial gasses market. So, in my opinion, this stock is profitable for both short term and long term investors.
Eastman Chemical Company (NYSE:EMN)’s financial position is also very stable. Previously, the company used to pay constant dividends, but for the last three years, its dividend yield has been increasing every year. Its acquisition of Solutia and expansion of Therminol 66 plant will bring higher revenue and improve profit margins. Therefore, I would recommend this stock as a buy.
usman iftikhar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. usman is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Stocks to Consider in the Chemical Industry originally appeared on Fool.com and is written by usman iftikhar.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
