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Eastman Chemical (EMN) Up 9.4% Since Last Earnings Report: Can It Continue?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for Eastman Chemical (EMN). Shares have added about 9.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Eastman Chemical due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Eastman Chemical Tops Earnings & Sales Estimates in Q4

Eastman Chemical recorded profits of $32 million or 23 cents per share for the fourth quarter of 2020, up from the year-ago profit of $26 million or 19 cents per share.

Barring one-time items, earnings were $1.69 per share for the quarter, up from $1.42 in the year ago-quarter. Earnings trounced the Zacks Consensus Estimate of $1.53.

Revenues dropped around 1% year over year to $2,186 million in the quarter. It surpassed the Zacks Consensus Estimate of $2,142 million.

The company gained from its innovation-driven growth model and cost-management actions in the reported quarter.

Segment Review

Revenues from the Additives and Functional Products division edged up 1% year over year to $773 million for the reported quarter, aided by higher volumes and mix growth that offset lower pricing. The company saw double-digit growth in coatings additives on higher demand in the transportation end market and strong demand in building and construction.

Revenues from the Advanced Materials unit rose 6% year over year to $674 million. The increase can be attributed to higher volumes and mix growth. The company saw revenue growth across all businesses. Pricing fell due to lower raw material prices.

Chemical Intermediates sales dropped 8% year over year to $531 million, hurt by lower selling prices, volumes and mix. Lower raw material and energy prices impacted selling prices. Volumes fell due to maintenance shutdowns and the discontinuation of specific product lines at the company’s Singapore facility.

Fibers segment sales went down 8% year over year to $208 million on lower volumes, prices and mix. Acetate tow sales volumes were stable in the quarter. Volumes fell due to softness in the textiles end market as a result of the coronavirus pandemic.

FY20 Results

Earnings (as reported) for full-year 2020 were $3.50 per share, down from $5.48 per share a year ago. Adjusted earnings per share were $6.15 for 2020, down from $7.13 a year ago.

Net sales dropped around 9% year over year to $8,473 million for the full year. Sales fell due to the impacts of the pandemic on the global economy and demand for some of the company’s products.

Financials

Eastman Chemical ended 2020 with cash and cash equivalents of $564 million, a nearly three fold year-over-year increase. Net debt at the end of the year was $5,054 million, down around 9% year over year.

Eastman Chemical generated cash from operating activities of $1.5 billion and free cash flow of $1.1 billion in 2020.

The company also returned $418 million to its shareholders through dividends and share repurchases during the year.

Guidance

Eastman Chemical said that it still faces uncertainties associated with the pandemic as it moves ahead and remains focused on disciplined capital allocation, growing new business revenues and aggressively managing costs.   

The company expects adjusted earnings per share for 2021 to be 20-30% higher than the 2020 level. It also expects to generate more than $1 billion of free cash flow.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 12.47% due to these changes.

VGM Scores

Currently, Eastman Chemical has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Eastman Chemical has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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