What's In Store For Eastman Chemical (EMN) In Q1 Earnings?
Zacks Investment Research | Apr 22, 2019 08:02AM ET
Eastman Chemical Company (NYSE:EMN) is set to release first-quarter 2019 results after the closing bell on Apr 25. The chemical maker should gain from strength in its specialty businesses, its cost management actions and synergies of acquisitions in the to-be-reported quarter. However, it is expected to continue to face headwind from raw materials cost inflation and some demand weakness in China in the quarter.
The Zacks Consensus Estimate for revenues for Eastman Chemical for the first quarter is currently pegged at $2,603 million, indicating a roughly 0.2% year over year decline.
Revenues from Eastman Chemical’s Additives and Functional Products division is anticipated to witness a 0.3% decline year over year as the Zacks Consensus Estimate for the first quarter is pegged at $936 million. Advanced Materials unit’s revenues are expected to fall 0.7% year over year as the Zacks Consensus Estimate for the first quarter is $688 million.
Revenues for the Chemical Intermediates segment are projected to rise 1.1% from the year-ago quarter as the Zacks Consensus Estimate for the first quarter stands at $738 million.
Lastly, the Fibers segment is expected to witness a 1.2% decline in revenues year over year as the Zacks Consensus Estimate is pegged at $242 million for the first quarter.
Eastman Chemical’s shares have gained around 14.9% year to date, outperforming the roughly 0.5% decline recorded by the industry .
Let's see how things are shaping up for this announcement.
Factors at Play
Eastman Chemical, in its fourth-quarter 2018 earnings call, said that it sees slower economic growth in 2019 and expects some of the challenges it witnessed in the fourth quarter to continue in the first quarter.
Eastman Chemical’s high margin products and its aggressive cost management actions are likely to support its earnings in the first quarter. The company should gain from sustained growth of its high margin specialty products. The company’s productivity measures and actions to raise selling prices of products should also support margins.
The company is taking a more aggressive approach to cost management this year to keep its manufacturing costs in control. Its cost reduction actions are expected to contribute to its earnings in the to-be-reported quarter.
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Eastman Chemical should also gain from synergies of acquisitions (especially Taminco Corporation) in the March quarter. The Taminco acquisition has provided attractive cost and revenue synergy opportunities.
However, Eastman Chemical has been seeing a spike in raw materials costs, mostly in its chemical intermediates unit. Raw materials cost headwind is expected to persist in the first quarter. The company will also likely face headwind from higher energy and distribution costs.
Moreover, Eastman Chemical is witnessing lower demand for its specialty products in China. Sales volumes for specialty plastics are under pressure due to customer inventory destocking associated with the U.S.-China trade conflict. Some demand weakness will likely continue in the March quarter.
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