Eastman Chemical (EMN) topped earnings expectations in fourth-quarter 2014, but its profits slid in the quarter as a sizable loss on pension and postretirement benefit plans more than offset a rise in its sales.
Eastman Chemical’s profit (as reported) tumbled around 95% to $16 million or 11 cents per share in the quarter from $346 million or $2.22 per share logged a year ago.
Earnings, excluding pension/postretirement benefit plans loss and other one-time items, were $1.64 per share, topping the Zacks Consensus Estimate of $1.54 while surpassing the year-ago adjusted earnings of $1.35 per share.
For 2014, adjusted earnings of $7.07 per share also came ahead of the Zacks Consensus Estimate of $6.96.
The Tennessee-based chemical maker’s shares rose roughly 2% in extending trading yesterday, reflecting the healthy earnings beat.
Revenues and Margins
Revenues moved up roughly 4% year over year to $2,349 million, beating the Zacks Consensus Estimate of $2,333 million. The company saw higher sales across all segments barring the Adhesives and Plasticizers division in the quarter.
Revenues from the U.S. and Canada rose around 2% year over year to $1,042 million. Sales from Asia-Pacific edged up 0.8% to $654 million. Europe, Middle East and Africa (EMEA) recorded a 9% rise in sales to $513 million while Latin American revenues leapt 12% to $140 million.
For the full year, revenues rose around 2% year over year to $9,527 million, also beating the Zacks Consensus Estimate of $9522 million.
Operating earnings (excluding one-time items) were $362 million in the quarter, up 10% from $329 million a year ago, aided by higher earnings across the board.
Segment Review
Revenues from the Additives and Functional Products division climbed 15% year over year to $488 million in the quarter. The rise is partly attributable to higher coating sales volumes and the acquisition of Taminco Corporation. Coatings sales volumes rose on strong demand across major end-use markets, especially building and construction and transportation.
Adhesives and Plasticizers segment sales fell 2% to $313 million as a result of lower adhesives resins volumes due to limited raw material availability and a decline in plasticizers selling prices.
Revenues from the Advanced Materials unit inched up 1% to $562 million on increased sales volumes of premium products including Eastman Tritan copolyester, interlayers with acoustic properties and window films on sustained market adoption, partly offset by reduced copolyester products selling prices and currency headwinds.
The Fibers segment sales edged up 1% to $371 million, aided by higher acetate flakes volumes to Eastman Chemical’s acetate tow joint venture in China and increased acetate tow pricing. This was offset by reduced acetyl chemicals sales volume.
Specialty Fluids and Intermediates division’s sales rose 2% to $606 million. Sales rose due to acquired aviation turbine oil and Taminco functional amines products sales, partly offset by reduced prices for olefin-based intermediates and heat transfer fluids and lower volume due to the shutdown of Longview, TX, olefins cracking unit.
Financials
Eastman Chemical ended 2014 with cash and cash equivalents of $214 million, down roughly 10% year over year. Long-term debt jumped 70% year over year to $7,248 million. Eastman Chemical generated operating cash flows of $455 million (down 10% year over year) in the reported quarter and $1.4 billion (up 8%) in 2014. It repurchased shares worth $410 million during 2014.
Outlook
Eastman Chemical said that it is well placed to gain in 2015 from its strong portfolio of specialty businesses and acquisitions that it made last year. The company, however, added that it is exposed to near-term challenges such as an uncertain global economic environment, oil price volatility and headwinds from a stronger dollar.
Eastman Chemical expects earnings per share (excluding non core and non-recurring items) for 2015 to be similar to what it achieved in 2014. The current corresponding Zacks Consensus Estimate is $7.41.
Eastman Chemical is expected to gain from its specific actions to drive earnings, its diversified portfolio and end-use markets it serves and continued strong market traction of its premium products.
Eastman Chemical is a Zacks Rank #3 (Hold) stock.
Some better-ranked chemical stocks include Compass Minerals International Inc. (CMP), Innophos Holdings Inc (IPHS) and Olin Corp. (OLN) with all holding a Zacks Rank #1 (Strong Buy).
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