Eastman Chemical Closes Aviation Oil Biz Buy - Analyst Blog

Chemical maker Eastman Chemical EMN has wrapped up its acquisition of BP Plc's BP aviation turbine engine oil business. The Tennessee-based company announced the acquisition in Jan 2014. Terms of the deal were not divulged.

The acquired assets are now a part of Eastman Chemical's Specialty Fluids & Intermediates business segment.

Eastman Chemical's shares gained around 1% in trading session following the announcement. The stock is up around 11% year-to-date and 27% over a year.

BP's global aviation turbine engine oil business has annual sales of around $100 million. The acquired assets include a production plant in Linden, NJ, and specialized laboratory equipment in Naperville, IL.
 
The buyout enables Eastman Chemical to better address the needs of the global aviation industry though the addition of the acquired fluids product portfolio to its Skydrol aviation hydraulic fluids.

The acquisition brings a lucrative specialty chemical business to the company's portfolio and complements its existing aviation product offerings. Eastman Chemical expects the buyout to add to its adjusted earnings for 2014.  

Eastman Chemical sees higher sales for the balance of 2014 and expects to benefit from its strategic actions this year. Apart from BP's assets, the company also agreed to buy Commonwealth Laminating & Coating, Inc. in Mar 2014. The acquisition will extend Eastman Chemical's performance films global offerings for solar control window film and protective film applications.

Eastman Chemical's diversified chemical portfolio, along with its integrated and diverse downstream businesses, remain its strength. It also benefits from business restructuring, cost-cutting measures and increased capacity additions.

However, the company remains exposed to raw material cost pressure. The uncertain economic recovery in Europe is also an overhang.

Eastman Chemical is a Zacks Rank #3 (Hold) stock.

Other companies in the chemical space worth considering include Compass Minerals International Inc. CMP and PetroLogistics LP PDH. While Compass Minerals retains a Zacks Rank #1 (Strong Buy), PetroLogistics holds a Zacks Rank #2 (Buy).