Eastman Chemical Beats on Earnings & Revs in Q4

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Eastman Chemical (EMN) topped earnings expectations in the fourth quarter of 2013 on strength across its Additives and Functional Products, Advanced Materials and Fibres divisions.

The Tennessee-based chemicals maker posted adjusted earnings (from continuing operations) of $1.35 per share for the reported quarter, topping the Zacks Consensus Estimate by 10 cents and exceeding the year-ago adjusted earnings of $1.19 per share. The adjusted earnings exclude non-core or non-recurring items.

On a reported basis, Eastman Chemical’s earnings (from continuing operation) came in at $2.22 per share compared with a loss of 35 cents in the year-ago quarter.

For full-year 2013, adjusted earnings (from continuing operations) came in at $6.44 per share, up 19.7% year over year. It exceeded the Zacks Consensus Estimate of $6.35.

Revenues and Margins

Revenues rose roughly 4% year over year to $2,265 million in the fourth quarter, beating the Zacks Consensus Estimate of $2,232 million. Revenues were driven by higher sales volume across the Additives and Functional Products, Advanced Materials and Fibers segments.

For full-year 2013, sales rose 15% year over year to $9.4 billion, beating the Zacks Consensus Estimate of $9.3 billion.

Eastman Chemical saw higher sales across all geographic regions in the quarter. Revenues from the U.S. and Canada rose roughly 5% year over year to $1,019 million. Sales from Asia-Pacific went up 5% to $649 million. Europe, Middle East and Africa (:EMEA) registered a 2% gain in sales to $472 million while Latin American revenues edged up 4% to $125 million.

Operating earnings (excluding the non-core or non-recurring items) were $329 million in fourth quarter  compared to $326 million a year ago. Higher sales volume and lower raw material and energy costs led to increased operating earnings.

Segment Review

Revenues from the Additives and Functional Products division moved up 11% year over year to $425 million in the reported quarter riding on volume gains for solvents product lines on higher demand in the durable goods and building and construction market, aided by added capacity at the Longview, Tex., facility and increased demand in the transportation market. Revenues include sales of certain products in the tire market which were earlier reported in the Adhesives and Plasticizers segment.

Adhesives and Plasticizers segment sales dipped 5% to $321 million on lower pricing in adhesives resins product lines and reduced volume in plasticizers. Increased competitive pressure led to a decline in selling prices for adhesives resins and seasonally lower volume in the quarter led to lower sales volumes in the plasticizers product lines.

Revenues from the Advanced Materials unit rose 5% year over year to $557 million on increased higher sales volume of Eastman Tritan copolyester and other copolyesters sold in the packaging market.

Fibers segment sales rose 14% to $369 million due to higher selling prices for acetate tow as a result of an increase in raw material and energy costs as well as sales of acetate flake to the new China acetate tow joint venture.

Revenues from the Specialty Fluids and Intermediates division edged up 1% to $593 million on volume gains for olefin-based products sold in North America.

Financials

Eastman Chemical exited 2013 with cash and cash equivalents of $237 million, down 5% year over year. Long-term debt fell 11% year over year to $4,254 million. Eastman Chemical generated operating cash flows of $1.3 billion in 2013.

Outlook

Looking ahead, Eastman Chemical remains optimistic of benefitting from specific actions that it is taking to increase earnings as well as balanced deployment of continued strong cash generation. Though the company faces challenges in the form of high raw material and energy costs, particularly for propane, and continued economic uncertainty, it expects 2014 earnings per share to be between $6.70 and $7.00 (excluding non core and non-recurring items).

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

Some better-ranked chemical stocks include L'Air Liquide SA (AIQUY), Northern Technologies International Corp. (NTIC) and PPG Industries Inc. (PPG).  While L'Air Liquide and Northern Technologies International hold a Zacks Rank #1 (Strong Buy), PPG Industries retains Zacks Rank #2 (Buy). 

Read the Full Research Report on PPG
Read the Full Research Report on EMN
Read the Full Research Report on AIQUY
Read the Full Research Report on NTIC


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