The past few years have thrown just about everything at us.

Going through the pandemic in 2020 disrupted so many things, it’s become a common scape goat for companies that continue to struggle today.

Supply chain disruptions, more lockdowns in China, and consumers tightening their wallets are all very real impacts.

But, today I’ve got a company that is practically unscathed by the pandemic and now is ready for whatever the market throws at them… Eastman Chemical Company (NYSE: EMN ).

And when I say unscathed, I mean it.

Today, we will do a quick dive into the company’s fundamentals and look at their price chart, as well as some sentiment analysis. But in the two former sections, you’ll see where the whole pandemic-related shocks barely moved the needle.

As a chemicals company, they were in a unique and diversified position to maintain healthy operations despite global chaos.

Let’s learn more about Eastman today and see if this is a stock we should bank on going higher, or one that is set to tank and head lower.

Eastman is a global specialty materials company that has been around for over a decade, founded in 1920. They produce a broad range of products found in items people use every day.

Based out of Kingsport, Tennessee, Eastman now has more than 50 manufacturing locations around the world.

The company uses an innovative growth model which includes leveraging its world class technology platforms.

It operates in four main segments: additives and functional products, advanced materials, chemical intermediates, and fibers. From here, its operations end up in several major end markets that we know and use every day: transportation, building and construction, consumables, industrials and chemicals processing, food, feed and agriculture, and health and wellness.

In April of this year, it sold its rubber additives business and the adhesive business.

But you can still see from the broad range of segments to end markets, this company is well diversified.

Diversified companies don’t offer the greatest growth possibilities, but they put you in a position to weather market storms.

And I don’t think we are out of the woods just yet with the latest round of market volatility. So stocks like this have to be on your radar as you look for more opportunities.

Now let’s look at the key stats to see how the company has been doing…

For this, I like to take a quick look at two key stats – earnings and revenue. That tells us how the top line has been performing, and how that is impacting the bottom-line results.

Below, you can see the revenues represented as the blue line on the chart (prices on the left in billions) and earnings per share as the green bars on the chart (prices on right).

We still see the dip in revenues in 2020, but it was following a trend of weak earnings and revenues since 2018. After 2020, this company has improved revenues and earnings so far, with expectations that stabilizes going into 2023.

At this point, I’m happy with stability.

Simply based on the average analyst ratings above, at $10.26 earnings per share, and the company's price-to-earnings of 9.79, the stock is expected to be above $100, or more than 10% higher from current levels.

But the company also has a low price-to-earnings ratio relative to the S&P 500 basket of stocks. That currently sits at 19.83 times earnings.

If Eastman can start to close that gap, at even 14 times earnings, the valuation of the company becomes $143 per share, or a 60% increase from the stock's price on September 2nd.

And that is with revenues staying basically flat from 2022 to 2023, seeing no real catalyst for a major change to the status quo.

Let's take a look at how earnings and revenues have trended in 2022, and how that may be impacting 2023 results.

In the second quarter of this year, sales revenue increased due to higher selling prices partially offset by lower sales volume. Adjusted EBIT increased due to higher selling prices more than offsetting higher raw material and energy costs and higher distribution costs, partially offset by lower sales volume.

But adjusted EBIT decreased in first six months due to lower sales volume and higher manufacturing costs, partially offset by higher selling prices more than offsetting higher raw material and energy costs and higher distribution costs.

Through the rest of this year and into 2023, it's crucial for the company to be able to manage these price increases to not deter customers, while also improving financial results.

Eastman Chemical provides absolutely critical pieces to end units and has seen strong demand over the last year and a half.

Their top three segments, additives and functional products, advanced materials, and chemical intermediates, each generated about $800 million in sales in the second quarter of 2022, and $150 million each in EBIT.

Additives and functional products saw sales volumes jump 11% in the second quarter, and EBIT increase 36%. This was thanks to 40% of the price increases coming in cost pass-through contracts that automatically adjust to the price fluctuations in the market.

Advanced materials saw revenues increase 10%, but with volume showing little change in demand from a year ago despite higher prices in 2022, the price increases were the sole reason for increased revenues.

In its chemical segment, sales increased 17% and EBIT jumped 12% in the second quarter. The jump in revenues was all due to pricing increases once again, as volumes remained relatively flat.

This is all a great example of the diversity though.

Even in this chemical segment, demand for plasticizers was lower, but this was partially offset by strong demand growth in the agricultural end-market for functional amines.

With two out of their three main segments seeing volumes basically flat so far in 2022, that's a cautionary sign for us.

The company needs end market products to increase sales in order to drive up demand for Eastman's product lines.

In 2022, it was the additives and functional product segment, along with prices increases, that are supporting the company in a volatile market.

In 2023, it could be a totally different story.

There are many risks to growth on the surface right now. Rising interest rates could slow down global demand for the end products that need Eastman's product mix. But the company has showed strong pricing powers when it comes to dealing with an inflationary market. We just don't know what 2023 is going to hold for the economy, as Eastman Chemical's success depends on the end market products demand.

Overall, this is a pretty strong view of the fundamental side.

Stable growth despite high inflation shows their ability to adapt. There remain risks going into 2023 that could disrupt growth, but in a base case environment where a global recession is short-lived, Eastman Chemicals should be able to maintain this stability.

So I’m liking what I see so far from Eastman Chemical.

Next up, we’ll look at a few sentiment indicators to see how investors feel about the stock.

I’ll start with one reading that kind of gets flipped upside down these days, the short interest.

Normally speaking, high short interest is a bearish sentiment. Eastman’s short interest as a percent of float is just 2.1%. That’s relatively low and nothing to be alarmed about.

So we have no worries there, which is what we were looking for.

I’m not interested in chasing another short squeeze play in this market. I think those trades are going to slow down for a bit.

On the analyst side, they are still loving the company.

Out of 22 analyst that cover the stock, it averages out to a buy rating with an average target price of $113 per share.

Eastman closed at $89.52 on September 2nd.

That’s a price 26% move these analysts are calling for and they may not be too far off.

Major banks are largely staying firm with their ratings, but Citigroup did downgrade the company to neutral at the beginning of August. Meanwhile, Wells Fargo maintained an overweight rating, Barclay’s maintained at equal weight and RBC Capital rated Eastman as sector outperform.

So mostly good things out of the analysts at these banks.

Again, nothing alarming on a sentiment level.

Solid readings across the board.

Last, but certainly not least, a quick look at the price chart.

In the chart below, I highlighted two key trend lines.

A falling resistance level in red and falling support level in green, by simply connecting the tops and bottoms.

But now it seems the stock is sitting in a falling wedge pattern, which shows us it could move sharply lower.

Right now, Eastman is sitting in the middle of these two trend levels.

That means it’s time to place your bets on which direction you think the stock is going to breakout in.

The lower highs and lower lows on the charts depict a stock that is clearly in a downtrend. But there’s not many stocks who are not trading in this pattern these days.

What is great to see is that from the pandemic lows back in 2020, this stock has held higher.

So many other companies have fallen below the pre-pandemic levels and even below the pre-pandemic lows.

Eastman is 20% higher than where shares were when the entire country shut down.

That has me leaning to limited downside risks for the stock and strong upside potential based on the price chart.

To recap, the company has a history of stability and it's shown that through this inflationary period.

Its valuation is already below market average. A slight improvement in the p/e ratio and simply meeting earnings and revenue expectations into 2023 has the stock on track for a 60% price increase.

Revenues and earnings are trending higher in 2022 thanks to price increases, making 2023 a pivotal year as sales volumes would need to improve to make this sustainable.

Sentiment readings were solid with an overall buy rating and 26% upside to price target.

Price chart showed a downward trend, but two key levels to watch that will give us clear signs of a trend change.

After all that, I like the stock to hold around its current price and push higher over the next few months making it a buy in my book.

Let’s add Eastman to my Bank It list for today.

This article was written by

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.