Eastman Chemical EMN topped earnings expectations in first-quarter 2015, but its profits tumbled in the quarter, hurt by sizable assets impairment and restructuring charges.
Eastman Chemical’s profit (as reported) slid around 27% to $171 million or $1.14 per share in the quarter from $233 million or $1.52 per share recorded a year ago.
Barring one-time items including assets impairment and restructuring charges of $96 million (post-tax), earnings were $1.84 per share, topping the Zacks Consensus Estimate of $1.61.
The Tennessee-based chemical maker’s shares rose roughly 2.4% in extending trading yesterday, reflecting the handy earnings beat.
Revenues and Margins
Revenues moved up roughly 6% year over year to $2,443 million, but missed the Zacks Consensus Estimate of $2,583 million. Higher sales across Additives & Functional Products and Specialty Fluids & Intermediates divisions were more than offset by declines in other businesses.
Revenues from the U.S. and Canada rose around 8% year over year to $1,160 million. Sales from Asia-Pacific slipped 14% to $517 million. Europe, Middle East and Africa (EMEA) recorded a 22% rise in sales to $625 million while Latin American revenues leapt 21% to $141 million.
Operating earnings (excluding one-time items) were $435 million in the quarter, up 14% from $383 million a year ago, aided by lower raw material and energy costs.
Segment Review
Revenues from the Additives and Functional Products division surged 44% year over year to $609 million in the quarter. The rise is partly attributable to sales of products of the acquired specialty amines and crop protection businesses of Taminco Corporation, partly masked by reduced selling prices resulting from lower raw material and energy costs.
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Adhesives and Plasticizers segment sales fell 7% to $320 million due to unfavorable currency swings and reduced plasticizers selling prices resulting from lower raw material and energy costs and competitive pressure.
Revenues from the Advanced Materials unit clipped 3% to $561 million as unfavorable currency exchange swings and lower pricing of copolyesters more than offset sales of products of the acquired Commonwealth Laminating and Coating performance films business.
The Fibers segment sales slipped 20% to $284 million due to reduced acetate tow and acetyl intermediates sales volume as a result of customer inventory destocking.
Specialty Fluids and Intermediates division’s sales rose 9% to $657 million. Sales rose due to acquired Taminco aviation turbine oil and functional amines products sales and increased intermediates sales volume, partly offset by reduced prices for olefin-based intermediates.
Financials
Eastman Chemical ended the quarter with cash and cash equivalents of $196 million, up roughly 6% year over year. Long-term debt jumped 57% year over year to $7,293 million. Eastman Chemical generated operating cash flows of $91 million in the reported quarter.
Outlook
Eastman Chemical said that it is facing increased challenges from an uncertain global economic environment, a stronger dollar and volatile oil prices. The company, however, noted that it is well placed for sixth straight year of earnings per share growth in 2015 on expectations for strong volume growth in its specialty businesses, synergies from recent acquisitions and disciplined cost management. It also expects to generate strong cash flows this year.
Eastman Chemical noted that its earnings outlook for 2015 has improved since January as it is gaining from strong positions in key markets, diversity of end-markets and geographies it serves, and better product mix from market adoption of its specialty products.
Earlier, the company, in its fourth-quarter 2014 earnings call, said that it expects earnings per share (excluding non core and non-recurring items) for 2015 to be similar to what it achieved in 2014.
Eastman Chemical is expected to gain from its specific actions, diversified portfolio and end-use markets it serves and continued strong market traction of its premium products. However, the company is faced with competitive pressures and currency headwinds.
Eastman Chemical currently holds a Zacks Rank #4 (Sell).
Some better-ranked chemical stocks include LyondellBasell Industries N.V. LYB, Celanese Corporation CE and Methanex Corporation MEOH. While LyondellBasell holds a Zacks Rank #1 (Strong Buy), both Celanese and Methanex carry a Zacks Rank #2 (Buy).
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