Morgan Stanley believes Eastman likely to still move forward with Longview plant

Morgan Stanley analyst Vincent Andrews notes Eastman (EMN) has lost its $375M grant from the Department of Energy associated with the thermal energy/battery aspect of its Longview, Texas molecular recycling facility. While this is very likely the final word on the grant, the firm expects the company will see if there is any chance of getting to the “retain” list, but it assigns a very low probability to that outcome at this point. Morgan Stanley believes that the company is likely to still move forward with the Longview facility, but will have to reduce its scope to make the CapEx/returns appropriate. Further, it recalls that Eastman was intending to supply its take/pay contract on rPET with Pepsi (PEP) from the Longview plant, adding that it believes the company still intends to do such. With that said, Morgan Stanley notes Eastman was already adding a rPET line to its Kingsport plant and could certainly supply Pepsi from there. Net, it still expects Overweight-rated Eastman to supply Pepsi in an economic manner from one plant or the other.