Eastman Chemical (EMN) Q4 Earnings Miss, Sales Beat Estimates

Eastman Chemical Company (NYSE:EMN) EMN recorded a profit of $378 million or $2.81 per share for the fourth quarter of 2021, up from a profit of $32 million or 23 cents in the year-ago quarter.

Barring one-time items, earnings were $1.81 per share for the quarter, up from $1.69 in the year-ago quarter. Earnings, however, missed the Zacks Consensus Estimate of $1.89.

Revenues rose around 23% year over year to $2,694 million in the quarter. The figure surpassed the Zacks Consensus Estimate of $2,424.9 million.

The company gained from strong growth of its specialty product lines on the back of its innovation-driven growth model amid headwinds from supply-chain and logistics constraints and higher raw material and energy costs in the reported quarter. It saw higher end-market demand on the back of the global economic recovery.

Eastman Chemical Company Price, Consensus and EPS Surprise

Eastman Chemical Company price-consensus-eps-surprise-chart | Eastman Chemical Company Quote

Segment Review

Revenues from the Additives and Functional Products division went up 17% year over year to $907 million for the reported quarter, aided by higher selling prices. Sales volume/mix was flat as gains in major markets, including building & construction, feed additives, and aviation fluids, were masked by the impact of the divested tire additives product lines.

Revenues from the Advanced Materials unit rose 15% year over year to $772 million in the previous-year quarter. The upside was driven by volume/mix growth and higher selling prices. The volume growth and favorable product mix were driven by innovation and market development as well as stronger demand for specialty plastics products.

Chemical Intermediates sales climbed 46% year over year to $777 million, led by an increase in selling prices due to higher raw material, energy and distribution prices. Improved mix on higher sales of functional amines in the agricultural end market and specialty plasticizers was masked by reduced sales volume due to the closure of the company’s Singapore manufacturing facility.

Fibers segment sales went up 14% year over year to $238 million, on the back of volume/mix growth driven by strong growth for textiles products due to innovation and market development and recovery of the textiles end market.

FY21 Results

Earnings for full-year 2021 were $6.25 per share compared with earnings of $3.50 per share a year ago. Net sales shot up 24% year over year to $10,476 million.

Financials

Eastman Chemical ended 2021 with cash and cash equivalents of $459 million, a roughly 19% year-over-year decline. Net debt at the end of the year was $4,700 million, a roughly 7% decline year over year.

Eastman Chemical generated cash from operating activities of $1,619 million and a free cash flow of $1,064 million in 2021. The company also returned $1.4 billion to its shareholders through dividends and share repurchases during the year. It also repaid $350 million of debt in 2021.

Guidance

Moving ahead, Eastman Chemical envisions market demand to remain strong and expects the pricing actions that it took in the second half of 2021 to deliver a strong spread tailwind in the specialty businesses. It also expects to benefit from innovation and market development initiatives as well as a significantly lower cost structure as it continues to implement its operations transformation program and have considerably lower manufacturing maintenance costs.

The company expects revenues in 2022 to be higher on a year-over-year basis. It expects adjusted earnings per share of $9.50-$10 for 2022. It also anticipates operating cash flow to be more than $1.6 billion for this year.

Price Performance

Eastman Chemical’s shares have gained 18.6% over a year, outperforming the 6.3% rise of the industry.

Image Source: Zacks Investment Research

Zacks Rank & Other Key Picks

Eastman Chemical currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Commercial Metals Company (NYSE:CMC) CMC, Albemarle (NYSE:ALB) Corporation ALB and AdvanSix (NYSE:ASIX) Inc. ASIX.

Commercial Metals, sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 62% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised 39.5% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 13.1%, on average. CMC has rallied around 68% in a year.

Albemarle, carrying a Zacks Rank #1, has an expected earnings growth rate of 51.3% for the current year. ALB's consensus estimate for the current year has been revised 5.4% upward over the past 60 days.

Albemarle beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 22.1%. ALB shares have gained around 24% in a year.

AdvanSix, carrying a Zacks Rank #1, has an expected earnings growth rate of 7.4% for the current year. The Zacks Consensus Estimate for ASIX’s current-year earnings has been revised 5.3% upward in the past 60 days.

AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 46.9%. ASIX has rallied around 88% in a year.

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