Eastman Chemical Q1 Earnings Squeak Past Ests - Analyst Blog

Eastman Chemical's EMN profit slipped in first-quarter 2014 as modest gains across its Additives and Functional Products and Fibres divisions were offset by declines in Advanced Materials and Specialty Fluids and Intermediates units. Higher impairment and restructuring charges also weighed on the bottom line in the reported quarter.

The TN-based chemical maker logged profit (as reported) of $233 million or $1.52 per share in the quarter, a 5.7% fall from $247 million or $1.57 per share recorded a year ago.

Earnings, excluding integration charges related to Solutia acquisition and impairment and restructuring costs, were $1.61 per share in the reported quarter, beating the Zacks Consensus Estimate by a penny while falling short of the year-ago adjusted earnings of $1.62 per share.

Revenues and Margins

Revenues edged down roughly 0.1% year over year to $2,305 million, missing the Zacks Consensus Estimate of $2,403 million. The company saw tepid sales performances across the board in the quarter.  

The results were mixed across geographic regions. Revenues from the U.S. and Canada clipped 0.7% year over year to $1,073 million. Sales from Asia-Pacific inched up 1% to $601 million. Europe, Middle East and Africa (EMEA) recorded a 0.2% rise in sales to $514 million while Latin American revenues edged down 0.8% to $117 million.

Operating earnings (excluding the non-core or non-recurring items) were $383 million in quarter, down 5% from $403 million a year ago, hurt by lower earnings in the Specialty Fluids and Intermediates division.

Segment Review

Revenues from the Additives and Functional Products division edged up 1% year over year to $423 million in the reported quarter. Higher coatings sales volumes on healthy demand in building and construction and transportation markets were offset by lower volume for rubber additives due to customer inventory destocking in Asia Pacific.

Adhesives and Plasticizers segment sales were flat at $345 million as higher volume for adhesives resins on strong demand for hygiene and packaging was offset by lower pricing in adhesives resins and plasticizers due to competitive pressure.

Revenues from the Advanced Materials unit slipped 1% to $581 million as lower sales volume for performance films offset increased volume for Eastman Tritan copolyester and premium acoustic interlayers.

Fibers segment sales rose 2% to $354 million as higher pricing more than offset lower sales volume for acetate tow. Volume was affected by customer buying patterns and added industry capacity including the company's China acetate tow joint venture.

Revenues from the Specialty Fluids and Intermediates division edged down 1% to $601 million as lower volumes more than offset an increase in selling prices.

Financials

Eastman Chemical ended the quarter with cash and cash equivalents of $185 million, up 4% year over year. Long-term debt fell 3% year over year to $4,635 million. Eastman Chemical repurchased shares worth $260 million during the quarter.

Outlook

Looking ahead, Eastman Chemical sees higher sales in the remaining three quarters of 2014. The company expects to gain from specific actions that it has taken up to increase earnings as well as balanced deployment of strong cash flow for the balance of 2014.

Eastman Chemical reaffirmed its earnings guidance for 2014 and continues to expect earnings per share to be between $6.70 and $7.00 (excluding non core and non-recurring items).

Eastman Chemical is a Zacks Rank #4 (Sell) stock.

Some better-ranked chemical stocks include Celanese Corporation CE, LyondellBasell Industries NV LYB and Methanex Corporation MEOH with all retaining a Zacks Rank #2 (Buy).