Eastman Chemical (EMN) Tops Q3 Earnings, Sales Estimates
Eastman Chemical Company’s EMN profits rose in the third quarter of 2017, aided by its cost management actions, disciplined capital allocation and growth of high-margin products. The chemical maker recorded profit of $323 million or $2.22 per share, up roughly 39% from the year-ago figure of $232 million or $1.56.
Barring one-time items, earnings were $2.19 per share for the quarter, up from $1.86 in the year ago-quarter. Earnings topped the Zacks Consensus Estimate of $2.03.
Revenues rose around 8% year over year to $2,465 million in the quarter, beating the Zacks Consensus Estimate of $2,387 million.
Segment Review
Revenues from the Additives and Functional Products division went up 18% year over year to $886 million in the reported quarter. The increase was attributable to higher sales volumes for most product lines.
Revenues from the Advanced Materials unit edged up 1% year over year to $646 million on improved product mix from increased sales volume of premium products.
Chemical Intermediates sales rose 9% to $696 million on the back of higher selling prices and improved competitive conditions.
Fibers segment sales fell 10% to $224 million due to lower selling prices, in particular, for acetate tow.
Financials
Eastman Chemical ended the third quarter of 2017 with cash and cash equivalents of $195 million, down roughly 6% year over year. Net debt at the end of the quarter was $6,499 million, up around 2% year over year.
Eastman Chemical generated operating cash flows of $528 million during the quarter. The company returned $100 million to shareholders through share repurchases during the quarter.
Outlook
The company expects to drive growth on the back of innovation and high margin products amid an uncertain global business environment. Eastman Chemical expects adjusted earnings per share growth in 2017 to be toward the top end of the earlier projected range of 10-12% year over year, excluding the financial impact of the Kingsport operational incident.
On Oct 4, the company’s Kingsport coal gasification area suffered an operational incident. However, there were no reports of any adverse impact on the environment or on human health. The company noted that all areas of the manufacturing facility have resumed operations with the exception of coal gasification operations. The coal gasification area is expected to be operable by the end of the fourth quarter.
Though the company is still assessing the financial impact of the incident, it is expected to reduce operating earnings in the range of $50-100 million. The company expects costs associated with the incident to be around $100 million in the fourth quarter.
Price Performance
Eastman Chemical’s shares have rallied 26.5% over the past year, underperforming the 32.5% gain of the industry it belongs to.
Zacks Rank & Key Picks
Eastman Chemical currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the basic materials space include Koppers Holdings Inc. KOP, Huntsman Corporation HUN and FMC Corporation FMC, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Koppers has expected long-term earnings growth of 18%.
Huntsman has expected long-term earnings growth of 7%.
FMC has expected earnings growth of 11.3% for the current year.
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