On Mar 8, we issued an updated research report on chemical maker Eastman ChemicalEMN .
Eastman Chemical's profit surged in fourth-quarter 2015, helped by contributions of acquisitions, cost-saving actions and higher volumes in its specialty businesses. Adjusted earnings topped the Zacks Consensus Estimate but sales missed expectations. Lower pricing and unfavorable currency translation hurt revenues in the quarter.
Eastman Chemical, in its fourth quarter call, said that it is seeing increased challenges in 2016, stemming from a sluggish global economy, the crude oil price slump 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 amid the prevailing business environment.
While Eastman Chemical should gain from synergies of acquisitions, capacity additions and cost-cutting measures, it still faces pricing pressure across most of its businesses. The company saw lower revenues in the fourth quarter as a decline in selling prices more than offset sales contributions from acquisitions.
Soft pricing, partly due to competitive pressure, is affecting the company's Adhesives and Plasticizers segment. Moreover, lower selling prices of propylene and ethylene are impacting results in the specialty fluids and intermediates division.
Eastman Chemical also faces currency headwinds given the strengthening of the U.S. dollar vis-à-vis a basket of currencies, especially euro. Currency-related headwind is expected to continue to affect its sales moving ahead. Moreover, uncertainty regarding the timing of a recovery in Europe remains a concern.
Eastman Chemical is a Zacks Rank #4 (Sell).
Stocks to Consider
Better-ranked companies in the basic materials space include Koninklijke DSM N.V. RDSMY , Ferroglobe PLC GSM and Flexible Solutions International Inc. FSI . While Koninklijke DSM holds a Zacks Rank #1 (Strong Buy), both Ferroglobe and Flexible Solutions carry a Zacks Rank #2 (Buy).
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