Eastman Chemical (EMN) is trading 4% higher on the session, after management raised its first-quarter earnings guidance last night to at least $1.19 a share, vs. the consensus estimate of $0.89. At $61.36 a share, the stock is now 13% above my cost basis in the five weeks since I started my position.
So far, Eastman is playing out exactly how I'd hoped it would. We bought the stock after management said the fourth quarter was slow, knowing the company generally lags the commodity chemicals makers, like Dow Chemical (DOW) and DuPont (DD) by a quarter or so. So while the chemical sector remains white-hot, as global demand remains well ahead of supply, Eastman has now joined the Dows of the world on the 52-week high list.
That said, I'm not ready to sell any of my 2,500 Eastman shares just yet. The stock has merely just begun to catch up with its peers, and could keep moving up toward $70 in the coming months as the chemicals benefit from the current upcycle.
P.S. Kmart Holding KMRT also posted solid earnings this morning, and the retailer's core operating results should improve with each quarter in 2005. If the stock had not already rallied in the teens percentagewise over the past week and a half to $110.85, I think we'd be seeing more of a reaction than today's fractional gain. I maintain that Kmart has considerble upside potential once the Sears (S) deal closes later this month.
Regards,
James J. Cramer
DISCLOSURE: At the time of publication, Cramer was long Eastman Chemical and Kmart.
Send email to james.cramer@thestreet.com.