Sophisticated Investors Should Avoid: TAL Education Group (TAL), Eastman Chemical Company (EMN)

TAL Education Group (NYSE: TAL) shares are 62.24% up in the year-to-date (YTD) period and have moved 5.95% or $4.39 higher in the latest trading session. However, stock’s trailing 12-month performance remains nearly +76.76% lower. Comparatively, the stock is -5.20% down YTD and 21.45% over the trailing 3-month period. If we look at the shorter duration, its week performance is 2.06% and -3.42% over the month.

Analyst Recommendations

On July 13, 2020, BofA Securities recommended the TAL stock is a Buy, while earlier, CLSA had Upgrade the stock as a Underperform on July 31, 2020. 32 analysts offering the recommendations for the stock have a consensus rating of 2.00 to suggest that the TAL stock is a “Moderate Buy. 1 of the 32 analysts rate the stock as a “Sell”, while 1 has rated it as “Underweight”. 25 recommend buying, with 3 rating it as an Overweight.

The stock currently trades at $78.20 and analysts tracking its performance over the next 12 months have a consensus estimate price target of $86.49. The forecasts give the TAL Education Group stock a price target range of $102.00 on the higher side while at least one analyst think the stock could plunge to a low of $60.20. The two limits represent an upside potential of 23.33% or -29.9%.

Earnings Forecast

Analysts estimate the earnings to increase 350.00% in the current quarter to $0.12, up from the -$0.02 reported in the same quarter a year ago. For the current year, earnings should grow to an average of $0.81, up 36.80% from -$0.14 reported last year. Analysts also offered guidance for the next financial quarter, with their average projected EPS at between $0.2 and $0.3. Wall Street estimates earnings per share to be at an average of $1.44 for the next year.

Eastman Chemical Company (NYSE:EMN), on the other hand, is trading around $76.61 with a market cap of $10.29B and analyst research firms have a positive stance on its shares. Analysts predict that the stock will reach $81.42 and spell out a more modest performance – a 5.91% return. Some analysts are even forecasting $5.56 per share in earnings this year on a short term (1 year) basis.

Let us briefly look at the Eastman Chemical Company (EMN) financials, with a focus on its operating details as indicated in its earnings report for the last quarter.

Company balance sheet and cash flow

EMN’s operating margin was positive on the trailing 12 months basis, remaining steady at 9.80%, while the operating expenses over the recent quarter were at $318.0 million. This represented a 83.47% of the company’s total revenues which amounted $1.92 billion. With this in place, we can see that the company’s diluted EPS inclined $0.20 on the year-over-year period, growing to $1.85 as given in the last earnings report.

In terms of the balance sheet & cash flow as of (Sep 2020), the total assets figure advanced to $15.97 billion from $16.46 billion over the previous quarter. The cash flow from operating activities totaled $607.0 million, significantly higher than the $417.0 million reported in the year-ago quarter. The company’s free cash flow for the quarter was $411.0 million.

Insider activity

Insiders have transacted a total of 12 times at Eastman Chemical Company over the last 6 months, with insider purchases undertaken 8 times and accounting for 72,603 shares. Insider sales totaled 64,346 shares over the same period, with these deals completed in 4 transactions. Looking at these numbers, we realize that net purchases over that period are 4.0 shares. Insiders now hold a total of 840.21k shares after the latest sales, with 1.10% net shares purchased.

Major holders

Insiders own 0.30% of the company shares, while shares held by institutions stand at 86.10% with a share float percentage of 134.55M. Investors are also buoyed by the number of investors in a company, with Eastman Chemical Company having a total of 900 institutions that hold shares in the company. The top two institutional holders are Vanguard Group, Inc. (The) with over 15.52 million shares worth more than $1.08 billion. As of Jun 29, 2020, Vanguard Group, Inc. (The) held 11.47% of shares outstanding.

The other major institutional holder is JP Morgan Chase & Company, with the investment firm holding over 10.45 million shares as of Jun 29, 2020. The firm’s total holdings are worth over $727.75 million and represent 7.72% of shares outstanding.