Eastman Chemical Company EMN is set to release fourth-quarter 2017 results after the closing bell on Feb 1.
Eastman Chemical saw higher profits in the third quarter of 2017, driven by its cost management actions, disciplined capital allocation and growth of high-margin products. Its adjusted earnings were $2.19 per share for the third quarter, up from $1.86 in the year ago-quarter. Earnings topped the Zacks Consensus Estimate of $2.03.
Revenues rose around 8% year over year to $2,465 million in the quarter, beating the Zacks Consensus Estimate of $2,387 million.
Eastman Chemical has outperformed the industry it belongs to over a year. The company’s shares have gained around 31.8% over this period, compared with roughly 28.3% gain recorded by the industry.
Eastman Chemical topped the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of roughly 5%. Is the company poised for another winning quarter? Let's see how things are shaping up for this announcement.
Factors to Watch For
Revenues for Eastman Chemical for the fourth quarter is projected to rise roughly 4.6% year over year as the Zacks Consensus Estimate for the quarter is currently pegged at $2,290 million.
Revenues from Eastman Chemical’s Additives and Functional Products division is anticipated to witness a 10.6% rise from the year ago figure as the Zacks Consensus Estimate for the fourth quarter is pegged at $796 million.
Advanced Materials unit’s revenues are expected to increase 3.9% from the year ago quarter as the Zacks Consensus Estimate for the fourth quarter is $607 million.
Revenues for the Chemical Intermediates segment are projected remain flat year over year as the Zacks Consensus Estimate for the fourth quarter stands at $643 million.
Meanwhile, the Fibers segment is expected to witness an 16.5% year over year decline in revenues as the Zacks Consensus Estimate is pegged at $192 million for the fourth quarter.
Eastman Chemical, in October 2017, said that it expects adjusted earnings per share growth in 2017 to be toward the top end of the earlier projected range of 10-12% year over year, excluding the financial impact of the Kingsport operational incident.
The company’s Kingsport coal gasification area suffered an operational incident on Oct 4, However, there were no reports of any adverse impact on the environment or on human health.
Eastman Chemical expects the financial impact of the incident to reduce operating earnings between $50 million and $100 million with costs associated with the incident of around $100 million in the fourth quarter.
Eastman Chemical’s high margin products and its aggressive cost management actions are likely to continue to drive its earnings in the fourth quarter. The company should gain from sustained growth of its high margins specialty products.
Eastman Chemical remains focused on cost-cutting and productivity actions. Its cost reduction actions are expected to contribute around 50 cents to earnings per share for full-year 2017.
Eastman Chemical should also gain from synergies of acquisitions, especially Taminco Corporation. The Taminco acquisition has provided attractive cost and revenue synergy opportunities.
However, Eastman Chemical continues to face pricing pressure. Prices of acetate tow remain weak, hurting the company’s Fibers unit.
The company is also exposed to raw material pricing headwinds. Higher input costs are expected to contribute to lower earnings in the company’s chemical intermediates business in the fourth quarter compared with the third as reflected in the company’s guidance. Ethylene margins are also expected to be under pressure in the fourth quarter.
Nevertheless, the company’s actions to increase selling prices of its products and reduce costs are expected to help it offset the impact of these headwinds in the to-be-reported quarter.
Eastman Chemical Company Price and Consensus
Eastman Chemical Company Price and Consensus | Eastman Chemical Company Quote
Earnings Whispers
Our proven model shows that Eastman Chemical is likely to beat on earnings estimates this quarter. This is because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Zacks ESP: Earnings ESP for Eastman Chemical is currently pegged at +17.85%. This is because the Most Accurate estimate stands at $1.33 while the Zacks Consensus Estimate is pegged at $1.12. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Eastman Chemical currently carries a Zacks Rank #3. The combination of Zacks Rank #3 and a positive ESP makes us reasonably confident of an earnings beat.
Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Huntsman Corporation HUN has an Earnings ESP of +3.27% and carries a Zacks Rank #1.
Agnico Eagle Mines Limited AEM has an Earnings ESP of +20.99% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
LyondellBasell Industries NV LYB has an Earnings ESP of +0.55% and a Zacks Rank #2.
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