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What's in Store for Eastman Chemical (EMN) in Q4 Earnings?

Zacks Equity Research

Eastman Chemical Company EMN is set to release fourth-quarter 2019 results after the closing bell on Jan 30. A difficult global business environment and weak demand might have impacted the chemical maker’s sales volumes in the quarter. However, the company’s earnings are likely to have benefited from its cost management actions and growth in high-margin products.

Eastman Chemical missed the Zacks Consensus Estimate for earnings in each of the trailing four quarters. For this timeframe, the company has an average negative surprise of roughly 6.9%.

Shares of the Eastman Chemical are down 9.6% over a year, compared with the 26.3% decline of its industry.


 

Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

The Zacks Consensus Estimate for revenues for Eastman Chemical for the fourth quarter is currently pegged at $2,171 million, indicating a roughly 8.6% year-over-year decline.

The Zacks Consensus Estimate for Eastman Chemical’s Additives and Functional Products division revenues is pegged at $771 million, suggesting a 9.4% decline year over year. The Zacks Consensus Estimate for Advanced Materials unit’s revenues is $619 million, indicating a fall of 0.8% year over year.

The Zacks Consensus Estimate for the Chemical Intermediates segment’s revenues stands at $581 million, indicating a 15.7% decline from the year-ago quarter. The same for the Fibers segment is pegged at $207 million, calling for a 2.4% year-over-year decline.

Factors to Watch For

Eastman Chemical is focused on productivity and cost-cutting actions in the wake of a challenging environment. It is taking an aggressive approach to cost management to keep its manufacturing costs in control. Benefits of these actions are expected to get reflected on fourth-quarter results.

The company is also focused on growing new business revenues from innovation. It expects new business revenues from innovation to increase to more than $400 million for 2019. The company is likely to have gained from growth in high-margin innovation products in the quarter to be reported.

Moreover, the company’s actions to raise selling prices of its products amid an inflationary environment are likely to have contributed to its bottom line in the fourth quarter.

However, weaker demand might have hurt sales volumes in the fourth quarter. Eastman Chemical faced challenging global economic conditions in the last reported quarter due to trade issues. Trade-related pressures impacted consumer discretionary markets such as transportation and consumer durables.

The company, in its third-quarter earnings call, noted that it expects sales volumes and capacity utilization to decline in the fourth quarter due to the worsened global business environment resulting from trade uncertainties and other macro factors.

Moreover, the company is likely to have faced headwind, in the to-be-reported quarter, from turnaround costs at its Longview manufacturing site in Texas. Higher plant shutdown costs and a local power disruption at Longview hurt margins in its Chemical Intermediates unit in the last reported quarter. Similar headwind, as indicated by the company in its guidance, is likely to have weighed on margins in this segment in the December quarter.

Moreover, weak acetate tow sales volumes due to soft demand are likely to have hurt performance in the fiber segment in the fourth quarter. Trade-related issues are affecting demand, hurting tow volumes.

Eastman Chemical Company Price and EPS Surprise

 

Eastman Chemical Company Price and EPS Surprise

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

Zacks Model

Our proven model does not conclusively predict an earnings beat for Eastman Chemical this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.
 
Earnings ESP: Earnings ESP for Eastman Chemical is -2.80%. This is because the Most Accurate Estimate is currently pegged at $1.30 while the Zacks Consensus Estimate stands at $1.34. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: Eastman Chemical carries a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Bunge Limited BG, scheduled to release earnings on Feb 12, has an Earnings ESP of +18.18% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Gold, Inc. RGLD, scheduled to release earnings on Feb 5, has an Earnings ESP of +0.78% and carries a Zacks Rank #1.

Cleveland-Cliffs Inc. CLF, scheduled to release earnings on Feb 27, has an Earnings ESP of +6.25% and carries a Zacks Rank #2.

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Eastman Chemical Company (EMN) : Free Stock Analysis Report
 
Royal Gold, Inc. (RGLD) : Free Stock Analysis Report
 
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