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Eastman Chemical (EMN) Misses Q2 Earnings, Revenue Estimates

Zacks Equity Research

Eastman Chemical Company EMN saw lower profits in the second quarter of 2019, hurt by lower demand for its specialty products in China and Europe due to trade issues. The chemical maker recorded profit of $258 million or $1.85 per share, down roughly 25% from the year-ago profit of $344 million or $2.39.

Barring one-time items, earnings were $1.99 per share for the quarter, down from $2.22 in the year ago-quarter. Earnings also trailed the Zacks Consensus Estimate of $2.09.

Revenues dropped around 10% year over year to $2,363 million in the quarter. The company saw lower sales across its segments. The top line missed the Zacks Consensus Estimate of $2,539.5 million.

The company faced challenging global economic conditions in the second quarter due to trade tensions. Trade-related pressures impacted consumer discretionary markets such as transportation and consumer durables across China and Europe.

Eastman Chemical Company Price, Consensus and EPS Surprise

 

Eastman Chemical Company Price, Consensus and EPS Surprise

Eastman Chemical Company price-consensus-eps-surprise-chart | Eastman Chemical Company Quote

Segment Review

Revenues from the Additives and Functional Products division fell 13% year over year to $823 million for the reported quarter. The decline was due to reduced sales volume, unfavorable product mix, lower selling prices and unfavourable currency swings.

Revenues from the Advanced Materials unit declined 5% year over year to $696 million. The decline is attributable to reduced sales volume due to the U.S.-China trade dispute and lower global automotive sales. Unfavorable foreign currency translation also impacted sales.

Chemical Intermediates sales went down 11% to $631 million, hurt by lower selling prices for olefins and acetyls products and reduced functional amines products sales volumes.

Fibers segment sales dropped 12% to $213 million, impacted by reduced acetate tow sales volumes due to softer market demand resulting from trade issues, customer buying patterns and general market decline.
 
Financials

Eastman Chemical ended the quarter with cash and cash equivalents of $186 million, down around 4% year over year. Net debt at the end of the quarter was $6,169 million, down around 5% year over year.

Eastman Chemical generated cash from operating activities of $422 million and free cash flow of $330 million during the reported quarter. The company returned $211 million to shareholders through share repurchases and dividends in the quarter.

Outlook

Eastman Chemical noted that it does not expect underlying macroeconomic conditions to improve in the second half due to the challenging global business environment resulting from the trade conflict. However, it expects reduced customer inventory destocking.

The company also expects to gain from its cost reduction actions and the flow through of lower-cost raw materials in the second half. Considering these factors, the company expects adjusted earnings per share for 2019 to be $7.50-$8.00.

Price Performance

Eastman Chemical’s shares have gained 10.3% year to date, outperforming the 17.6% decline of the industry it belongs to.



 

 

Zacks Rank & Key Picks

Eastman Chemical currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks worth considering in the basic materials space include Israel Chemicals Ltd. ICL, Flexible Solutions International Inc FSI and Air Products and Chemicals, Inc. APD.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares are up roughly 8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 342.9% for the current fiscal year and carries a Zacks Rank #2 (Buy). Its shares have surged around 109% in the past year.

Air Products has an expected earnings growth rate of 10.3% for the current fiscal year and carries a Zacks Rank #2. The company’s shares have gained around 41% over the past year.  

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