Critical Analysis: Eastman Chemical (EMN) & Westlake Chemical Partners (WLKP)

Eastman Chemical (NYSE: EMN) and Westlake Chemical Partners (NYSE:WLKP) are both basic materials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, profitability, valuation, risk, dividends, analyst recommendations and institutional ownership.

Volatility and Risk

Eastman Chemical has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500. Comparatively, Westlake Chemical Partners has a beta of 1.24, meaning that its share price is 24% more volatile than the S&P 500.

Valuation & Earnings

This table compares Eastman Chemical and Westlake Chemical Partners’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Eastman Chemical $9.20 billion 1.31 $2.15 billion $6.32 13.12
Westlake Chemical Partners $1.09 billion 0.58 $456.12 million $1.42 16.34

Eastman Chemical has higher revenue and earnings than Westlake Chemical Partners. Eastman Chemical is trading at a lower price-to-earnings ratio than Westlake Chemical Partners, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations and price targets for Eastman Chemical and Westlake Chemical Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Eastman Chemical 0 4 4 0 2.50
Westlake Chemical Partners 0 0 2 0 3.00

Eastman Chemical currently has a consensus price target of $88.57, indicating a potential upside of 6.84%. Westlake Chemical Partners has a consensus price target of $26.50, indicating a potential upside of 14.22%. Given Westlake Chemical Partners’ stronger consensus rating and higher probable upside, analysts plainly believe Westlake Chemical Partners is more favorable than Eastman Chemical.

Dividends

Eastman Chemical pays an annual dividend of $2.04 per share and has a dividend yield of 2.5%. Westlake Chemical Partners pays an annual dividend of $1.46 per share and has a dividend yield of 6.3%. Eastman Chemical pays out 32.3% of its earnings in the form of a dividend. Westlake Chemical Partners pays out 102.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Eastman Chemical has raised its dividend for 5 consecutive years and Westlake Chemical Partners has raised its dividend for 2 consecutive years.

Institutional & Insider Ownership

88.5% of Eastman Chemical shares are owned by institutional investors. Comparatively, 79.3% of Westlake Chemical Partners shares are owned by institutional investors. 1.1% of Eastman Chemical shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Eastman Chemical and Westlake Chemical Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Eastman Chemical 10.11% 22.54% 6.74%
Westlake Chemical Partners 3.60% 4.34% 2.54%

Summary

Eastman Chemical beats Westlake Chemical Partners on 13 of the 17 factors compared between the two stocks.

Eastman Chemical Company Profile

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.

Westlake Chemical Partners Company Profile

Westlake Chemical Partners LP is a limited partnership formed by Westlake Chemical Corporation (Westlake). The Company operates, acquires and develops ethylene production facilities and other assets. Its business and operations are conducted through Westlake Chemical OpCo LP (OpCo). OpCo sells ethylene to Westlake and others, as well as sells co-products of ethylene production, including propylene, crude butadiene, pyrolysis gasoline and hydrogen. As of December 31, 2016, OpCo’s assets included three ethylene production facilities, which primarily convert ethane into ethylene, and a 200-mile ethylene pipeline. As of December 31, 2016, OpCo owned two ethylene production facilities at Westlake’s Lake Charles, Louisiana site (Petro 1 and Petro 2, collectively Lake Charles Olefins), and one ethylene production facility at Westlake’s Calvert City, Kentucky site (Calvert City Olefins), with an annual capacity of approximately 630 million pounds.

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