Eastman Chemical Company (EMN): Shares define bullish 'flag'

Posted Apr 10th 2008 10:55AM by Larry Schutts
Filed under: Good news, Dow Chemical (DOW), Technical Analysis, Stocks to Buy

Eastman Chemical Company (NYSE: EMN) manufactures and markets chemicals, fibers and plastics. Key products include coatings, adhesives, specialty plastics, cellulose acetate fibers, polyethylene terephthalate polymers for packaging, and intermediates based on oxo and acetyl chemistries. The company has operations in 23 countries and employees 11,000. Dow Chemical (NYSE: DOW) is a major competitor.

Eastman surprised investors earlier in the week, when it issued upside guidance for first quarter earnings. The firm now sees Q1 EPS of $1.30, versus the Street consensus estimate of $1.21. Management said that continued strong sales volume and higher selling prices offset higher raw material and energy costs.

EMN shares popped on the news and have since begun to consolidate the gain in a bullish "flag" pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys", two "buys", four "holds" and one "sell". The EMN Price to Sales ratio (0.80), Price to Book ratio (2.71), Price to Cash Flow ratio (8.47) and EPS Growth rate (27.00%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 84% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $56.31 and $72.44. A stop-loss of $60.50 looks good here. Note that the firm is expected to report Q1 earnings on April 24th, after the close.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in either of the stocks mentioned above.

Tags: Eastman Chemical Company, EastmanChemicalCompany, EMN, flag, fundamental analysis, FundamentalAnalysis, momentum, technical analysis, TechnicalAnalysis