Eastman Chemical Faces Pricing Pressure, Currency Risks

On Sep 1, we issued an updated research report on chemical maker Eastman Chemical (NYSE:EMN) . .

Eastman Chemical’s revenues and profit slipped year over year in second-quarter 2016, hurt by lower selling prices. Adjusted earnings and sales missed the respective Zacks Consensus Estimate. The company saw lower prices across all businesses in the quarter.

Eastman Chemical, in its second-quarter call, said that it is benefiting from strong growth of its specialty products and its cost-cutting actions. However, the company is seeing increased competitive pressure and compressing olefin spreads. As such, the company sees a decline in adjusted earnings per share for 2016 that approaches 10% below adjusted earnings per share for 2015 compared with its earlier expectation of a decline of roughly 5%.

While Eastman Chemical is gaining from synergies of acquisitions, capacity additions and cost-cutting & productivity measures, it faces pricing pressure across its business segments as witnessed in the second quarter. Lower selling prices, especially in the Chemical Intermediates unit, hurt its revenues in the second quarter.

Soft pricing, in part, due to competitive pressure is affecting the company’s Chemical Intermediates segment. The company is seeing increased competitive pressure, especially from the Asia Pacific region, which is hurting prices.

Margins in the olefin business are expected to remain under pressure due to weak pricing. The depressed oil price environment and continued pressure on olefin spreads are expected to weigh on the company’s earnings in 2016. Weak methanol prices are also affecting prices for some acetyl and amines products.

Eastman Chemical also faces currency translation risks given a stronger U.S. dollar vis-à-vis a basket of currencies. Its revenues remain exposed to unfavorable currency swings. The company also faces headwind from challenging global economic conditions.

Eastman Chemical has a Zacks Rank #4 (Sell).

EASTMAN CHEM CO Price

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Stocks to Consider

Some better-ranked companies in the chemical space include The Chemours Company (NYSE:CC) , Innophos Holdings Inc (NASDAQ:IPHS) and Innospec Inc. (NASDAQ:IOSP) , all sporting a Zacks Rank #1 (Strong Buy).

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