Eastman Chemical Company (EMN) reported encouraging results for the first quarter of fiscal 2010. During the quarter, net earnings were $101 million, up from $18 million in the same period of fiscal 2009. EPS was $1.37, up from 25 cents in the year-ago quarter. Reported EPS surpassed the Zacks Consensus Estimate of $1.15.
Net revenue grew 38.5% to $1,564 million from $1,129 million in the first quarter of fiscal 2009. The growth was attributable to higher sales volume based on increased consumer demand, a favorable shift in product mix, and higher selling prices.
On a segmental basis Coatings, Adhesives, Specialty Polymers, and Inks bloated 49.2% while Fibres increased only 3.1%. Revenue in the Performance Chemicals and Intermediates and Performance Polymers boosted 58.5% and 22.0% respectively. Finally, revenue in the Specialty Plastics segment increased 58.0% year over year.
Regionally, revenue in the United States and Canada increased 24.7% and in the Asia Pacific grew 59.0%. Europe, Middle East, and Africa revenue increased to $276 million from $178 million, representing a growth of 55.0% year over year and Latin American revenue increased 67.1%.
The company reported a 79.3% rise in gross profit and margin increased by 460 basis points. During the quarter, operating income was $182 million, up from $25 million in the same quarter of the previous year. Operating margin increased by 940 basis points to 11.6%.
During the quarter, the company reported net cash used by operating activities of $25 million from a positive of $82 million in the year-ago quarter. Free cash flow was a negative of $88 million from a negative of $60 million at the end of the first quarter in fiscal 2009. However, there was an increase in cash and cash equivalents of $143 million to $483 million at the end of the first quarter in fiscal 2010.
At the end of the first quarter, net debt was $1.12 billion, down from $1.26 billion at the end of the year-ago quarter.
For the second quarter of fiscal 2010, management expects EPS in the range of $1.50-$1.60 and for the full year 2010, EPS is expected in the range of $5.00-$5.25. For fiscal 2010, the company expects to generate free cash flow between $200 million and $300 million.
We believe Eastman has a solid foundation of businesses that will provide strong earnings, going forward. We maintain our Outperform recommendation on the stock.
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