It has been about a month since the last earnings report for Eastman Chemical (
EMN Quick Quote EMN - Free Report) . Shares have added about 1.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Eastman Chemical due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Eastman Chemical’s Q2 Earnings & Sales Surpass Estimates
Eastman Chemical slipped to a loss of $146 million or $1.07 per share for the second quarter of 2021, from a profit of $27 million or 20 cents in the year-ago quarter.
Barring one-time items, earnings were $2.46 per share for the quarter, up from 85 cents in the year-ago quarter. Earnings topped the Zacks Consensus Estimate of $2.32. Revenues rose 38% year over year to $2,653 million in the quarter from $1,924 in the previous-year quarter. The figure also surpassed the Zacks Consensus Estimate of $2,398.8 million. The company gained from its innovation-driven growth model, operational execution and cost-management actions in the reported quarter. It saw revenue growth across all segments led by continued market revival. Segment Review
Revenues from the Additives and Functional Products division went up 35% year over year to $925 million for the reported quarter, aided by 23% volume/mix growth and a 9% increase in selling prices. Increased sales of coatings additive products contributed to a favorable product mix and selling prices were higher primarily due to increased raw-material prices. However, increased volumes in building & construction end markets were offset by limited product availability from shutdowns related to planned manufacturing maintenance.
Revenues from the Advanced Materials unit rose 36% year over year to $769 million in the previous-year quarter. The upside was primarily driven by 31% volume/mix growth due to end-market recovery. A favorable product mix across the segment was led by increased sales of premium products, including performance films and specialty plastic products. Chemical Intermediates sales increased 60% year over year to $736 million, led by a 51% increase in selling prices due to higher raw-material prices. Fibers segment sales went up 6% year over year to $223 million, on the back of 7% volume/mix growth that was partially offset by 2% lower selling prices. Higher sales volume was driven by the continued recovery of the textiles end market. Lower selling prices were mostly due to previously negotiated multi-year contracts for acetate tow. Financials
Eastman Chemical ended the quarter with cash and cash equivalents of $609 million, a roughly 5% year-over-year decline. Net debt at the end of the quarter was $4,939 million, a 2.3% decline year over year.
Eastman Chemical generated cash from operating activities of $426 million and a free cash flow of $319 million in the quarter. The company also returned $328 million to its shareholders through dividends and share repurchases during the quarter. Guidance
Eastman Chemical said that it is seeing continued momentum, going forward, as it gains from innovation, strong end-market recovery and cost discipline from its operations transformation program. It expects adjusted earnings per share of $8.8-$9.2 for 2021. It also anticipates free cash flow to exceed $1.1 billion for the year, which would be the fifth consecutive year of a free cash flow above $1 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 11.8% due to these changes.
Currently, Eastman Chemical has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Eastman Chemical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.