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Eastman Chemical Poised on Strategic Actions Amid Headwinds
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On Jun 21, we issued an updated research report on chemical maker Eastman Chemical (EMN - Free Report) .
Eastman Chemical’s profit surged in first-quarter 2016, helped by its cost-saving actions and continued momentum in its specialty businesses. Adjusted earnings topped the Zacks Consensus Estimate but sales missed expectations. Revenues fell in the quarter, hurt by lower pricing and unfavorable currency impact.
Eastman Chemical, in its first quarter call, said that it is seeing increased competitive pressure, stemming from a sluggish global economy, depressed oil prices and weakening currencies across Asia and Europe. The company is looking to deliver adjusted earnings per share for 2016 that approach the level achieved in 2015 ($7.28 per share) amid the prevailing business environment.
Eastman Chemical’s diversified chemical portfolio, along with its integrated and diverse downstream businesses remains its strength. It is gaining from synergies of acquisitions, capacity additions and cost-cutting measures. The company remains committed to improve its cost position and boost productivity.
Eastman Chemical should continue to gain from its strategic acquisitions. The acquisition of Solutia represents a significant move in the company’s strategy to boost its foothold in the emerging markets, especially in Asia Pacific. Moreover, the buyout of specialty chemical company, Taminco Corporation, has reinforced Eastman Chemical’s foothold in attractive niche end-markets including food, feed and agriculture where Taminco has a strong presence.
Eastman Chemical should also gain from capacity additions. With the expansion of Eastman Chemical 168 non-phthalate plasticizer capacity by roughly 15%, the company is now able to better serve the growing needs of non-phthalate plasticizers globally. Eastman Chemical remains focused on further growing capacity in this market.
However, Eastman Chemical still faces pricing pressure across most of its businesses. The company saw lower revenues in the first quarter, partly due to reduced selling prices.
Soft pricing, in part, due to competitive pressure is affecting the company’s Chemical Intermediates unit. Earnings for this segment are expected to decline in 2016 due to pricing pressure and the low oil pricing environment.
Eastman Chemical also faces currency headwinds given a stronger U.S. dollar vis-à-vis a basket of currencies. Currency-related headwind is expected to continue to affect its sales moving ahead. The company also faces headwind from challenging conditions in Europe.
Eastman Chemical is a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked companies in the diversified chemical space include Albemarle Corporation (ALB - Free Report) , Innospec Inc. (IOSP - Free Report) and Asahi Kasei Corporation (AHKSY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).
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Eastman Chemical Poised on Strategic Actions Amid Headwinds
On Jun 21, we issued an updated research report on chemical maker Eastman Chemical (EMN - Free Report) .
Eastman Chemical’s profit surged in first-quarter 2016, helped by its cost-saving actions and continued momentum in its specialty businesses. Adjusted earnings topped the Zacks Consensus Estimate but sales missed expectations. Revenues fell in the quarter, hurt by lower pricing and unfavorable currency impact.
Eastman Chemical, in its first quarter call, said that it is seeing increased competitive pressure, stemming from a sluggish global economy, depressed oil prices and weakening currencies across Asia and Europe. The company is looking to deliver adjusted earnings per share for 2016 that approach the level achieved in 2015 ($7.28 per share) amid the prevailing business environment.
Eastman Chemical’s diversified chemical portfolio, along with its integrated and diverse downstream businesses remains its strength. It is gaining from synergies of acquisitions, capacity additions and cost-cutting measures. The company remains committed to improve its cost position and boost productivity.
Eastman Chemical should continue to gain from its strategic acquisitions. The acquisition of Solutia represents a significant move in the company’s strategy to boost its foothold in the emerging markets, especially in Asia Pacific. Moreover, the buyout of specialty chemical company, Taminco Corporation, has reinforced Eastman Chemical’s foothold in attractive niche end-markets including food, feed and agriculture where Taminco has a strong presence.
Eastman Chemical should also gain from capacity additions. With the expansion of Eastman Chemical 168 non-phthalate plasticizer capacity by roughly 15%, the company is now able to better serve the growing needs of non-phthalate plasticizers globally. Eastman Chemical remains focused on further growing capacity in this market.
However, Eastman Chemical still faces pricing pressure across most of its businesses. The company saw lower revenues in the first quarter, partly due to reduced selling prices.
Soft pricing, in part, due to competitive pressure is affecting the company’s Chemical Intermediates unit. Earnings for this segment are expected to decline in 2016 due to pricing pressure and the low oil pricing environment.
Eastman Chemical also faces currency headwinds given a stronger U.S. dollar vis-à-vis a basket of currencies. Currency-related headwind is expected to continue to affect its sales moving ahead. The company also faces headwind from challenging conditions in Europe.
Eastman Chemical is a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked companies in the diversified chemical space include Albemarle Corporation (ALB - Free Report) , Innospec Inc. (IOSP - Free Report) and Asahi Kasei Corporation (AHKSY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>