We recently compiled a list of the 8 Best Plastics Stocks To Invest In Now. In this article, we are going to take a look at where Eastman Chemical Company (NYSE:EMN) stands against the other plastics stocks.
Key Trends and Challenges Facing the Plastics Industry
The importance of plastics in modern society cannot be overstated. They play a vital role in various industries, including automotive, construction, food and beverage, and healthcare. Plastics are lightweight, durable, and versatile, making them essential for the production of a wide array of products that enhance our daily lives.
Additionally, the plastics industry plays a crucial role in the global economy, contributing significantly to job creation and innovation. According to the Plastics Industry Association’s 2024 Size and Impact Report, the US plastics sector alone accounted for over 1 million jobs and generated $519.1 billion in shipments in 2023. This sector has shown resilience, with plastics manufacturing employment growing at a rate of 1.1% annually from 2013 to 2023, outpacing the overall manufacturing growth of 0.7% during the same period.
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Recent trends indicate a strong push towards sustainability within the plastics sector. Companies are increasingly investing in recycling technologies and circular economy initiatives to reduce waste and improve environmental outcomes. According to a report by The Business Research Company, the global plastic recycling market was valued at $41.71 billion in 2023. The market is expected to expand at a compound annual growth rate (CAGR) of 8.1% during 2024-2028 to reach a value of $61.56 billion by the end of the forecast period.
According to the United Nations Environment Programme (UNEP), the production of plastic has been increasing rapidly since the 1970s, outpacing the growth of any other material. Global plastic production could reach 1,100 million tonnes by 2050. A significant portion of this plastic, around 36%, is used for packaging, including single-use items like food and beverage containers. Unfortunately, about 85% of these single-use plastics end up in landfills or as unmanaged waste, contributing to a growing environmental crisis.
Demand for plastics is expected to remain high in the coming years. While limiting plastic production may seem beneficial for the environment, it could lead to unintended negative consequences for economies worldwide, particularly affecting those in developing regions that rely on affordable plastic products.
The plastics industry is not only vital for economic stability but also plays a crucial role in addressing modern sustainability challenges. With ongoing investments in recycling and innovation, the plastics industry is expected to continue to thrive while adapting to changing consumer preferences and regulatory landscapes.
Our Methodology
To compile our list of the 8 best plastics stocks to invest in now, we looked for the largest plastics companies. We also reviewed our own rankings and consulted various online resources to compile a list of the best plastics stocks.
From an initial pool of more than 20 plastics stocks, we focused on the top 8 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 8 best plastics stocks to invest in now are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Eastman Chemical Company (NYSE:EMN)
Number of Hedge Fund Holders: 26
Eastman Chemical Company (NYSE:EMN) is an American chemical and specialty materials company that produces a wide range of advanced materials, chemicals, fibers, and plastics. The company’s products are used in various everyday items. Eastman Chemical Company (NYSE:EMN) serves key markets like transportation, building, construction, and consumer goods.
In its third-quarter 2024 financial results, the company reported a 9% increase in sales revenue. This growth was fueled by an 8% rise in sales volume. Earnings before interest and taxes (EBIT) improved significantly to $329 million, up from $256 million in the same quarter last year. Eastman Chemical Company’s (NYSE:EMN) cash from operations was $396 million, demonstrating strong financial health.
The company is also advancing its circular economy initiatives with plans to construct a second methanolysis facility in Longview, Texas. This move is in line with the company’s commitment to innovation and sustainable practices, which was also highlighted during their Circular Economy Deep Dive event in November 2024. Eastman Chemical Company (NYSE:EMN) projects substantial financial growth, estimating over $2.1 billion in EBITDA and an additional $500 million from its circular initiatives by 2029, showcasing its potential as a strong investment opportunity.
To meet its goals for EBITDA from its circular initiatives, Eastman Chemical Company (NYSE:EMN) plans to invest significantly in organic growth. The company expects to spend about $800 million on capital projects in 2025. For 2026 and 2027, capital expenditures are expected to be between $800 million and $1 billion.
Overall, EMN ranks 7th on our list of the best plastics stocks to invest in now. While we acknowledge the potential of EMN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EMN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.