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Eastman Chemical (EMN) Q3 Earnings Top Estimates, Sales Lag

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Eastman Chemical (EMN - Free Report) saw lower profits in the third quarter of 2016 as its sales fell on lower selling prices. The chemical maker recorded profit (as reported) of $232 million or $1.56 per share, a roughly 9% decline from $256 million or $1.71 per share recorded a year ago.

Barring one-time items, earnings were $1.86 per share for the quarter, up from $1.84 per share in the year ago-quarter. Earnings topped the Zacks Consensus Estimate of $1.67.

Revenues and Margins

Revenues fell around 7% year over year to $2,287 million in the quarter, missing the Zacks Consensus Estimate of $2,308 million. The decline was mainly due to lower prices and reduced Fibers sales volume that more than offset higher sales volume in other segments.

Operating earnings (excluding one-time items) were $416 million in the quarter, down around 9% from $459 million a year ago as an increase in Advanced Materials unit was more than offset by declines in the other businesses.

Segment Review

Revenues from the Additives and Functional Products division went down 5% year over year to $752 million in the reported quarter. The decline was mainly due to lower selling prices as a result of reduced raw material and energy costs.

Revenues from the Advanced Materials unit rose 2% year over year to $638 million as higher sales volume of premium products more than offset lower selling prices due to reduced raw material and energy costs.

Chemical Intermediates sales dropped 8% to $638 million, hit by lower selling prices resulting from sustained competitive pressure due to reduced oil prices and weak demand in Asia Pacific.

Fibers segment sales slid 23% to $248 million due to reduced sales volume and lower selling prices, in particular, for acetate tow.

Financials
 
Eastman Chemical ended the quarter with cash and cash equivalents of $207 million, down roughly 33% year over year. Total debt fell roughly 6% year over year to $6,608 million. Eastman Chemical generated operating cash flows of $450 million in the reported quarter. The company bought back shares worth $75 million during the quarter and also contributed $50 million to its U.S. defined pension plans.

Outlook

Eastman Chemical said that it is benefiting from strong growth of its high value products and its cost-cutting actions amid a challenging operating environment. The company sees adjusted earnings for 2016 in the band of $6.70 and $6.80 per share.

Eastman Chemical has a Zacks Rank #3 (Hold).

EASTMAN CHEM CO Price, Consensus and EPS Surprise

 

EASTMAN CHEM CO Price, Consensus and EPS Surprise | EASTMAN CHEM CO Quote

Other Stocks to Consider

Better-ranked companies in the chemical space include The Chemours Company (CC - Free Report) , Celanese Corporation (CE - Free Report) and Cabot Corporation (CBT - Free Report) .

Chemours holds a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth of 20.3% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Celanese has an expected earnings growth of around 9.4% for the current year. The stock carries a Zacks Rank #2 (Buy).

Cabot carries a Zacks Rank #2 and has an expected earnings growth of around 12.1% for the current year.

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