Eastman Chemical to expand production capacity

On August 23, 2017, Eastman Chemical (EMN) announced its plan to expand its copolyester site in Kuantan, Malaysia. The site expansion is expected to increase the production of PETG (polyethylene terephthalate glycol) by 20% over its existing capacity.

EMN expects the expansion activity to be completed by 1Q18, and the expansion is expected to help meet the growing demand for copolyester products.

Eastman Chemical to Increase Its Copolyester Production Capacity

This move should be a positive one for EMN’s Advanced Materials segment once the expansion is complete and should help it improve revenues. In 2Q16, the segment reported revenues of $657 million, implying a growth of 1% on a YoY (year-over-year) basis. With new expansion capacity, EMN hopes that the segment’s revenues and income will grow in a big way.

Burt Capel, Eastman Chemical’s vice president and general manager of Specialty Plastics, stated: “This expansion positions Eastman to meet the increasing global demand we’re seeing for our copolyester materials. This investment further solidifies Eastman’s commitment to the Asia-Pacific region and to providing our customers around the world with the highest quality materials in the market.”

Eastman’s stock performance last week

Eastman Chemical had a good week last week (ended August 25, 2017), gaining 2.4% to close the week at $84.87. EMN continued its upward trend and traded 3.4% above its 100-day moving average price of $82.11.

On a YTD (year-to-date) basis, the stock has returned 12.8%. Analysts see a further upside in the stock and have recommended a target price of $92.13 over the next 12 months, implying a return potential of 8.5% over its closing price on August 25, 2017. EMN’s RSI (relative strength index) of 55 suggests that the stock is neither overbought nor oversold.

Investors looking for indirect exposure to Eastman can invest in the ProShares Ultra Basic Materials (UYM), which has 1.3% of its portfolio in EMN. UYM also provides exposure to Dow Chemical (DOW), Praxair (PX), and Monsanto (MON), which had weights of 7.7%, 4.0%, and 5.5%, respectively, as of August 25, 2017.

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