Eastman Chemical Company ( EMN ) posted
fourth-quarter 2012 adjusted earnings (from continuing operations)
of $1.19 per share, in line with the Zacks Consensus estimate and
above the year-ago earnings of 78 cents. The adjusted earnings
exclude losses related to mark-to-market pension and other
post-retirement benefits (MTM), costs related to the acquisition of
Solutia Inc. as well as restructuring and impairment charges.AIR PRODS & CHE (APD): Free Stock Analysis
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On a reported basis, the Tenn.-based chemicals maker posted a loss
(from continuing operation) of $54 million or 35 cents a share
versus a profit of $12 million or 9 cents a share recorded a year
ago. The bottom line was hit by MTM losses of $276 million and
restructuring and impairment charges of $83 million, which offset
healthy double-digit growth in sales.
For full year 2012, the company reported adjusted earnings (from
continuing operation) of $5.38 per share, also meeting the Zacks
Consensus Estimate. Earnings, as reported, were $2.92 per
share, down from $4.24 a share posted a year ago.
The company's shares, which fell 36 cents (or 0.5%) to $71.15 in
regular trading yesterday, further slipped 65 cents in after-hours
Revenues and Margins
Revenues surged roughly 26% year over year to $2,169 million, but
missed the Zacks Consensus Estimate of $2,262 million. Strong gains
across the Additives and Functional Products and Advanced Materials
divisions together with the contributions of the Solutia
acquisition boosted the top line.
Higher sales were registered across all geographic regions in the
quarter. Sales from the U.S. and Canada rose roughly 5% year over
year to $969 million. Revenues from Asia-Pacific jumped 48% to $618
million. Sales in Europe, the Middle East and Africa increased 52%
to $462 million while Latin American revenues shot up 54% to $120
The company recorded an operating loss of $44 million in the
quarter compared with operating earnings of $19 million a year ago.
Adjusted operating earnings climbed 83% year over year to $326
For the full year, revenues climbed 13% year over year to $8,102
million, but missed the Zacks Consensus Estimate of $8,189
Revenues from the Additives and Functional Products segment soared
57% year over year to $384 million in the reported quarter, driven
by the acquisition of Solutia's rubber materials product
Sales from the Adhesives & Plasticizers segment went up 5% to
$338 million on sales volume gains stemming from the substitution
of phthalate plasticizers with non-phthalate plasticizers.
Revenues from the Advanced Materials division zoomed 91% to $528
million, boosted by the addition of Solutia's PVB sheet and resins
and performance films product lines.
Revenues from the Fibers segment were essentially flat year over
year at $325 million. Higher selling prices as a result of an
increase in raw material and energy costs were masked by a decline
in sales volume in the acetate yarn product line.
Specialty Fluids and Intermediates segment sales rose 6% to $590
million, supported by the addition of Solutia's specialty fluids
Eastman Chemical ended 2012 with cash and cash equivalents of $249
million, down 57% year over year. Total debt increased roughly
three-fold year over year to nearly $4.8 billion, primarily due to
the assumption of Solutia debt.
The company generated operating cash flows of $1.1 billion during
the year, up 80% year over year. Free cash flow increased more than
three-fold year over year to $471 million (including $187 million
in the fourth quarter).
Looking ahead, Eastman Chemical feels that the Solutia
acquisition, capacity expansions and its strong foothold in the
growing end markets will help the company deliver strong earnings
growth this year. However, uncertainty regarding the timing of a
recovery in Europe remains as overhang.
The company raised its adjusted earnings (from continuing
operations) forecast for 2013 to a band of $6.30 to $6.40 a share
from its earlier view of $6.25. The current Zacks Consensus
Estimate of $6.32 is within the forecast range.
Eastman Chemical's diversified chemical portfolio, along with its
integrated and diverse downstream businesses remains its strength.
The company should continue to benefit from the synergies of its
Solutia acquisition going forward. It also stands to gain from
business restructuring, cost-cutting measures and increased
Eastman Chemical currently holds a Zacks Rank #2 (Buy).
Other companies in the chemical industry worth considering are
Arkema S.A. ( ARKAY ), BASF
SE ( BASFY ) and
Air Products ( APD ). While Arkema
retains a Zacks Rank #1 (Strong Buy), both BASF and Air Products
hold a Zacks Rank #2 (Buy).