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Eastman Chemical's (EMN) Q4 Earnings Lag Estimates, Sales Beat

Eastman Chemical Company EMN reported earnings of a penny per share in the fourth quarter of 2022, reflecting a decline of 99.6% from the year-ago quarter's $2.81.

EMN posted adjusted earnings of 89 cents per share, down 50.8% from the year-ago quarter figure of $1.81. It missed the Zacks Consensus Estimate of $1.26.

The company’s revenues in the fourth quarter were $2,373 million, which beat the Zacks Consensus Estimate of $2,294.9 million. Sales decreased around 11.9% from $2,694 million reported in the prior-year quarter.

The top line declined due to reduced demand in key end markets like consumer durables and building and construction end markets. Consumer inventory de-stocking, higher than normal seasonal levels in North America, Europe and China, also contributed to the fall in EMN’s revenues in the fourth quarter. Lower demand in China due to pandemic-related disruption also contributed to the same. The company was able to raise its selling prices across its segment in response to higher raw materials costs and energy and distribution prices, which partly offset the impact of the headwinds stated above. Unfavorable currency translations also affected sales across its segments.

Eastman Chemical Company Price, Consensus and EPS Surprise

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 Highlights

Advanced Materials: Revenues from this segment declined 4.7% year over year to $736 million in the fourth quarter due to currency headwind, reduced demand and aggressive consumer de-stocking, particularly in the consumer durables market. Weakness in the automotive market in China also played a factor in the decline of segment revenues.  Selling prices were higher in response to the impact of higher raw material, energy and distribution costs.

Additives & Functional Products: Revenues from this segment were $705 million reflecting a decline of 1.4% from the year-ago quarter. Higher selling prices partly mitigated the impact of lower sales volume in all product lines, mainly due to lower demand and consumer de-stocking, which led to the decline in sales for this segment.

Chemical Intermediaries: Net sales from this segment were down 20.8% year over year to $615 million, primarily due to consumer de-stocking and reduced demand in end markets. Higher selling prices provided some relief to the segment's performance in the fourth quarter.

Fibers: This segment reported net sales amounting to $317 million, which reflected a rise of 33.2% year over year. The increase in revenues was mainly attributable to higher selling prices for acetate tow and textiles, which led to the recovery of adjusted EBIT margins to acceptable performance levels in the fourth quarter. Higher sales volume, mainly due to the fulfillment of demand attributable to capacity constraints, also contributed to the rise. However, these were offset by higher raw material, energy and manufacturing costs.

FY22 Results

Adjusted earnings for full-year 2022 were $7.88 per share compared with $8.85 a year ago. Net sales increased 1% year over year to $10,580 million.

Financials

Eastman Chemical ended 2022 with cash and cash equivalents of $493 million, up roughly 7.4% year over year. Net debt at the end of the year was $4,658 million, an around 0.9% decline.

Eastman Chemical generated cash from operating activities of $457 million in the reported quarter compared with $430 million a year ago. The company also returned $1.4 billion to its shareholders through share repurchases and dividends in 2022.

Guidance

Eastman Chemical stated that challenges to the global economy have increased, including soft end-market demand and aggressive inventory de-stocking entering 2023. The company sees the manufacturing recession scenario continuing in the first quarter of 2023, with a modest volume recovery in the second half of the year. The company expects to raise selling prices to improve spreads in its specialty businesses. It expects raw materials, energy and distribution costs to return to moderate levels in 2023.

EMN projects its cash flow from operating activities to be roughly $1.4 billion for 2023. The company expects adjusted EPS for full-year 2023 to grow between 5% and 15%.

Price Performance

EMN’s shares are down 22.4% over a year against a 2.9% rise recorded by its industry.

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Zacks Rank & Key Picks

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

Better-ranked stocks to consider in the basic materials space include Veritiv Corporation VRTV, Agnico Eagle Mines Limited AEM and FMC Corporation FMC. VRTV and AEM both sport a Zacks Rank #1 (Strong Buy), while FMC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Veritiv’s shares have gained 30.8% in the past year. The company has a projected earnings growth rate of 160.8% for the current year. VRTV topped Zacks Consensus Estimate in all of the last fourth quarters. It delivered a trailing four-quarter earnings surprise of 31.3% on average.

Agnico’s shares have gained 23.5% in the past year. The Zacks Consensus Estimate for AEM’s current-year earnings has been revised 0.4% upward in the past 60 days.

Agnico Eagle beat Zacks Consensus Estimate in three of the last four quarters. It delivered a trailing four-quarter earnings surprise of 26.4% on average.

FMC’s shares have gained 20.7% in the past year. The company has a projected earnings growth rate of 6.5% for the current year. FMC Corp. outpaced Zacks Consensus Estimate in all of the last four quarters. It delivered a trailing four-quarter earnings surprise of 7.9% on average.


 

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