Eastman Chemical Company

Eastman Chemical is using its global strength and higher prices to overcome high energy and raw material costs as first quarter earnings rose 24%. The company has beaten Wall Street estimates three out of the last four quarters. Eastman's forward P/E is 12.39.

Full Analysis

Eastman Chemical Company EMN - Analyst Report) manufactures and markets chemicals, fibers and plastics worldwide. The company produces 1,200 products in 23 countries.

Eastman, a Zacks #1 Rank (Strong Buy), manufactures differentiated coatings, adhesives and specialty plastics products, supplies cellulose acetate fibers; and produces PET polymers for packaging.

The company's products are used in packaging, food, drink and personal care products, fabrics for clothing and home furnishings, paints and plastics.

First Quarter Earnings Rose 24%

On Apr 24, Eastman Chemical reported first quarter earnings that increased 24% to $1.48 from $1.19 per share in the first-quarter of 2007. These results excluded asset impairment and restructuring charges, severance and pension charges, accelerated depreciation costs and deferred tax benefits. The company said the increase was due to improved operating results in the Performance Polymers and Fibers segments.

Revenue rose 6% to $1.7 billion over the first-quarter 2007. Higher prices offset a fall of 2% in sales volume in the quarter. The Coatings, Adhesives, Specialty Polymers and Inks segment saw revenues increase by 13%, due to higher selling prices and favorable exchange rates.

Like other manufacturers, Eastman is feeling the strain of higher raw material and energy costs. These costs increased by more than $150 million compared with the first-quarter 2007. But the company is, so far, able to offset these costs with price increases and it sees benefits from the company's global emphasis and diverse product line.

Eastman is Bullish About the Second Quarter

Despite a weakening U.S. economy and the continued high raw material and energy costs, the company expects second quarter earnings per share to be slightly above the first quarter's earning per share of $1.48, excluding charges.

Analysts Raise Estimates for the Second Quarter and the Full Year

Responding to the company's first quarter report and outlook for the second quarter, brokerage analysts have been raising second quarter and full year estimates. For the second quarter, consensus estimates increased two cents to $1.57 from $1.55 per share in the last month. Second quarter estimates jumped 14% in the last 90 days.

For the full year, consensus estimates rose 10 cents to $5.68 from $5.58 per share in the last 30 days. Estimates are up 14% in the last 90 days.

Eastman's forward P/E is 12.39. Its price-to-book is 2.90. The company has a stellar five-year average return on equity (ROE) of 20.24%. As an added bonus, EMN also has a current dividend yield of 2.40%.