Critical Review: Eastman Chemical (EMN) and A. Schulman (SHLM)
A. Schulman (NASDAQ: SHLM) and Eastman Chemical (NYSE:EMN) are both basic materials companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, profitabiliy, institutional ownership, earnings, risk and analyst recommendations.
Institutional and Insider Ownership
88.3% of A. Schulman shares are owned by institutional investors. Comparatively, 88.1% of Eastman Chemical shares are owned by institutional investors. 4.1% of A. Schulman shares are owned by company insiders. Comparatively, 1.1% of Eastman Chemical shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
This is a summary of recent recommendations and price targets for A. Schulman and Eastman Chemical, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
A. Schulman currently has a consensus target price of $31.50, suggesting a potential upside of 17.76%. Eastman Chemical has a consensus target price of $88.00, suggesting a potential upside of 4.67%. Given A. Schulman’s higher possible upside, equities research analysts clearly believe A. Schulman is more favorable than Eastman Chemical.
Earnings and Valuation
This table compares A. Schulman and Eastman Chemical’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|A. Schulman||$2.42 billion||0.33||$207.01 million||($12.50)||-2.14|
|Eastman Chemical||$9.20 billion||1.32||$2.15 billion||$6.32||13.30|
Eastman Chemical has higher revenue and earnings than A. Schulman. A. Schulman is trading at a lower price-to-earnings ratio than Eastman Chemical, indicating that it is currently the more affordable of the two stocks.
This table compares A. Schulman and Eastman Chemical’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
A. Schulman pays an annual dividend of $0.82 per share and has a dividend yield of 3.1%. Eastman Chemical pays an annual dividend of $2.04 per share and has a dividend yield of 2.4%. A. Schulman pays out -6.6% of its earnings in the form of a dividend. Eastman Chemical pays out 32.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. A. Schulman has increased its dividend for 5 consecutive years. A. Schulman is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Volatility and Risk
A. Schulman has a beta of 1.5, suggesting that its stock price is 50% more volatile than the S&P 500. Comparatively, Eastman Chemical has a beta of 1.28, suggesting that its stock price is 28% more volatile than the S&P 500.
About A. Schulman
A. Schulman, Inc. is an international supplier of plastic formulations, resins and services, and provides solutions to its customers’ requirements through custom-formulated products. The Company’s customers span a range of markets, such as packaging, mobility, building and construction, electronics and electrical, agriculture, personal care and hygiene, custom services, and sports, home and leisure. The Company’s segments include Europe, Middle East and Africa (EMEA), the United States and Canada (USCAN), Latin America (LATAM), Asia Pacific (APAC) and Engineered Composites (EC). As of August 31, 2016, the Company operated in six product families, including custom performance colors (CPC), engineered composites, Masterbatch solutions, engineered plastics, specialty powders and distribution services. The CPC product family offers powdered, pelletized and liquid color concentrates that are custom-designed for thermoplastic resins.
About Eastman Chemical
Eastman Chemical Company (Eastman) is an advanced materials and specialty additives company. The Company’s segments include Additives & Functional Products (AFP), Advanced Materials (AM), Chemical Intermediates (CI), and Fibers. In the AFP segment, it manufactures chemicals for products in the coatings, tires, consumables, building and construction, industrial applications, including solar energy markets, animal nutrition, care chemicals, crop protection, and energy markets. In the AM segment, it produces and markets its polymers, films, and plastics with differentiated performance properties for end uses in transportation, consumables, building and construction, durable goods, and health and wellness products. The CI segment leverages large scale and vertical integration from the cellulose and acetyl, olefins, and alkylamines streams to support its specialty operating segments. Its product lines in Fibers segment include Acetate Tow, Acetate Yarn and Acetyl Chemical Products.
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