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Eastman Chemical (EMN) Q1 Earnings Trump, Revenues Lag

Eastman Chemical EMN saw its profits jump in the first quarter of 2016, helped by its cost-management actions and strong growth of its specialty products. But its sales declined in the quarter, hurt by lower selling prices and currency headwinds.

The chemical maker recorded profit (as reported) of $251 million or $1.69 per share, a roughly 47% year over year surge from $171 million or $1.14 per share recorded a year ago.

Barring one-time items, earnings were $1.71 per share for the quarter, down from $1.84 per share in the year ago-quarter. However, it topped the Zacks Consensus Estimate of $1.53.

Revenues and Margins

Revenues fell around 8% year over year to $2,236 million in the quarter, missing the Zacks Consensus Estimate of $2,344 million. The decline was mainly due to lower sales in the Chemical Intermediates unit. Unfavorable currency translation and lower pricing weighed on the top line.

Operating earnings (excluding one-time items) were $406 million in the quarter, down around 7% from $435 million a year ago, as gains in Advanced Materials was more than offset by a decline in Chemical Intermediates.

 

 

Segment Review

Revenues from the Additives and Functional Products division went down 8% year over year to $737 million in the reported quarter. The decline was mainly due to lower selling prices as a result of reduced raw material and energy costs and competitive pressure for certain products, especially in Asia Pacific.

Revenues from the Advanced Materials unit rose 5% to $589 million due to higher sales volume of premium products, partly offset by reduced selling prices (mainly for copolyesters) due to lower raw material and energy costs.

Chemical Intermediates sales tumbled 21% to $620 million, hurt by lower selling prices resulting from reduced raw material and energy costs and sustained competitive pressure from weak demand in Asia Pacific.

Fibers segment sales edged down 1% to $280 million due to a decline in acetyl chemical sales volume and lower acetate tow selling prices.

Financials
 
Eastman Chemical ended the quarter with cash and cash equivalents of $202 million, up roughly 3% year over year. Total debt fell roughly 3% year over year to $7,078 million. Eastman Chemical generated operating cash flows of $47 million in the reported quarter, down 48% year over year.

Outlook

Eastman Chemical said that it is seeing increased competitive pressure, stemming from a sluggish global economy, depressed oil prices and weakening currencies across Asia and Europe. The company is looking to deliver adjusted earnings per share for 2016 that approach the level achieved in 2015 ($7.28 per share) amid the prevailing business environment.

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

Better-ranked companies in the chemical space include Akzo Nobel N.V. AKZOY, Arkema S.A. ARKAY and Koninklijke DSM N.V. RDSMY, all sporting a Zacks Rank #1 (Strong Buy).

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EASTMAN CHEM CO (EMN): Free Stock Analysis Report
 
ARKEMA-ADR (ARKAY): Free Stock Analysis Report
 
KONINKLIJKE DSM (RDSMY): Free Stock Analysis Report
 
AKZO NOBEL NV (AKZOY): Free Stock Analysis Report
 
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