Eastman Chemical Company (EMN) estimates its first-quarter 2011 profit to reach $2.00 per share and fiscal 2011 profit to reach $8.00 per share, based on stronger demand for its coatings, adhesives and plastics. Earlier the company had forecasted first-quarter profit in the range of $1.75 to $1.85 per share.
Eastman Chemical also expects to boost its annual earnings growth rate to more than 10% between 2010 and 2013, and earn nearly $10 per share by 2013.
However, the company believes its specialty plastics division will remain strained by higher costs in 2011 but will eventually boost its operating earnings by more than 50% in 2013 compared with 2010.
Earlier in February, Eastman Chemical reported solid fourth-quarter 2010 results. Excluding one-time charges, the chemical producer earned $1.41 per share versus $1.35 in the prior-year quarter on stronger demand for its coatings, adhesives and plastics. However, the results missed the Zacks Consensus Estimate of $0.11 per share on account of non-deductibility of early distributions under the executive deferred compensation plan.
Earnings from continuing operations were 23 cents per diluted share in the fourth quarter versus a loss of 21 cents in the fourth quarter of 2009. In fiscal 2010, earnings per share were $5.75 ($6.96 excluding one-time charges).
During the quarter, revenues climbed 23.4% year over year to $1.5 billion, driven by higher sales volume and increased selling prices. The higher sales volume was primarily attributable to strengthened end-use demand in packaging, durable goods, and other markets and the positive impact of growth initiatives. The increase in selling prices was in response to higher raw material and energy costs. However, revenue was in line with the Zacks Consensus Estimate.
In fiscal 2010, revenue was $5.8 billion, up 33% year over year.
Eastman Chemical’s diversified chemical portfolio, along with its integrated and diverse downstream businesses, is driving earnings. Eastman benefits from business restructuring and cost-cutting measures. The company has sold unprofitable units and closed down poorly performing ones. Eastman Chemical’s Fibers business continues to outperform and strong Specialty margins look increasingly credible.
A strengthening global economy, expansion in Korea and lower interest expenses after debt restructuring in 2010, will likely boost results going forward. The company, however, faces volatility in raw material and energy costs, higher pension expenses and other growth-related costs.
Moreover, Eastman battles with large multinational companies such as Celanese Corp. (CE) and The Dow Chemical Co. (DOW) across its major business segments.
Currently, Eastman has a short-term (1 to 3 months) Zacks #2 (Buy) Rank and a long-term (6 months and higher) Outperform recommendation.
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