Praxair (NYSE: PX) and Eastman Chemical (NYSE:EMN) are both large-cap basic materials companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, dividends, analyst recommendations, valuation, profitability, risk and institutional ownership.

Insider & Institutional Ownership

85.3% of Praxair shares are owned by institutional investors. Comparatively, 82.1% of Eastman Chemical shares are owned by institutional investors. 0.2% of Praxair 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 endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Praxair pays an annual dividend of $3.15 per share and has a dividend yield of 2.4%. Eastman Chemical pays an annual dividend of $2.04 per share and has a dividend yield of 2.3%. Praxair pays out 58.9% 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. Praxair has raised its dividend for 12 consecutive years and Eastman Chemical has raised its dividend for 5 consecutive years. Praxair is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Praxair and Eastman Chemical’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Praxair 14.10% 27.93% 8.25%
Eastman Chemical 10.11% 22.54% 6.74%

Valuation & Earnings

This table compares Praxair and Eastman Chemical’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Praxair $10.92 billion 3.43 $3.54 billion $5.35 24.49
Eastman Chemical $9.20 billion 1.37 $2.15 billion $6.32 13.81

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

Volatility and Risk

Praxair has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500. Comparatively, Eastman Chemical has a beta of 1.26, meaning that its share price is 26% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Praxair and Eastman Chemical, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Praxair 2 8 3 0 2.08
Eastman Chemical 0 4 5 0 2.56

Praxair presently has a consensus target price of $133.56, suggesting a potential upside of 1.93%. Eastman Chemical has a consensus target price of $90.00, suggesting a potential upside of 3.08%. Given Eastman Chemical’s stronger consensus rating and higher probable upside, analysts plainly believe Eastman Chemical is more favorable than Praxair.

Summary

Praxair beats Eastman Chemical on 10 of the 17 factors compared between the two stocks.

Praxair Company Profile

Praxair, Inc. is an industrial gas company. The Company’s operations are organized into five segments, four of which have been determined on a geographic basis of segmentation: North America, Europe, South America and Asia. In addition, it operates its surface technologies business through its subsidiary, Praxair Surface Technologies, Inc., which represents the fifth segment. Its operations consist of two product lines: industrial gases and surface technologies. Its industrial gases product line centers on the manufacturing and distribution of atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases). It also designs, engineers and builds equipment that produces industrial gases primarily for internal use. Its Surface Technologies segment, operated through Praxair Surface Technologies, Inc., supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders.

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.

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