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Can Eastman Chemical (Emn) Sustain Earnings Streak in Q3?
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Eastman Chemical Company (EMN - Free Report) is set to release third-quarter 2017 results after the closing bell on Oct 26.
Eastman Chemical saw higher profits in second-quarter 2017, aided by its cost management actions, disciplined capital allocation and growth of high-margin products. Adjusted earnings of $1.98 per share for the quarter topped the Zacks Consensus Estimate of $1.89.
Revenues rose around 5% year over year to $2,419 million in the second quarter, beating the Zacks Consensus Estimate of $2,366 million.
Eastman Chemical's stock has gained 32.7% over a year, modestly outperforming the 31.9% gain of the industry it belongs to.
Eastman Chemical topped the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 5.8%. Is the company poised for another winning quarter? Let's see how things are shaping up for this announcement.
Factors to Watch For
Eastman Chemical, earlier this month, provided an update on its earnings expectations for full-year 2017, including preliminary expectations of the impact of an operational incident at the company’s Kingsport manufacturing plant.
The company noted that fundamental state of business in the third quarter was strong, which is also expected to continue into the fourth quarter. Additionally, Eastman Chemical expects the financial impact of recent hurricanes in the United States to be neutral, with impacts varying by segment.
Given these factors, Eastman Chemical expects adjusted earnings per share growth in 2017 to be toward the top end of the earlier projected range of 10-12% year over year, excluding the financial impact of the Kingsport operational incident.
Earlier this month, the company’s Kingsport coal gasification area suffered an operational incident. However, there were no reports of any adverse impact on the environment or on human health. The company noted that all areas of the manufacturing facility are reinstating normalcy with the exception of coal gasification operations.
Eastman Chemical is using alternative processes to continue operations of all downstream derivative facilities of coal gasification with repairing works being on track. Though the company is still assessing the financial impact of the incident, it is expected to affect operating earnings in the range of $50-100 million, mostly in fourth-quarter 2017.
Eastman Chemical’s high margin products and its aggressive cost management actions are likely to continue to drive its earnings in the third quarter. The company should gain from sustained growth of its high margins specialty products.
Eastman Chemical remains focused on cost-cutting and productivity actions. The company is aims to achieve $100 million of cost savings in 2017. Its cost reduction actions are expected to contribute around 50 cents to earnings per share in 2017.
Eastman Chemical should also gain from synergies of acquisitions, especially Taminco Corporation. The Taminco acquisition has provided attractive cost and revenue synergy opportunities.
However, the company faces challenges in fibers and ethylene pricing. Lower prices of acetate tow are hurting its Fibers unit. Weak tow pricing may continue to weigh on sales in this segment in the third quarter.
Moreover, the company expects ethylene prices to be lower in second-half 2017 vis-à-vis the first half. As such, ethylene margins are expected to remain under pressure in the to-be-reported quarter.
Eastman Chemical is also seeing a spike in raw materials costs, especially in its Chemical Intermediates segment. Raw materials costs headwind is expected to persist in the third quarter. Nevertheless, the company’s actions to increase selling prices of its products are expected to help it offset the impact of raw material cost inflation.
Our proven model does not conclusively show that Eastman Chemical is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Eastman Chemical is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at $2.03. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Eastman Chemical currently carries a Zacks Rank #4 (Sell). We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some other companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
FMC Corporation (FMC - Free Report) has an Earnings ESP of +0.88% and a Zacks Rank #1.
Ingevity Corporation (NGVT - Free Report) has an Earnings ESP of +2.94% and sports a Zacks Rank #2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Can Eastman Chemical (Emn) Sustain Earnings Streak in Q3?
Eastman Chemical Company (EMN - Free Report) is set to release third-quarter 2017 results after the closing bell on Oct 26.
Eastman Chemical saw higher profits in second-quarter 2017, aided by its cost management actions, disciplined capital allocation and growth of high-margin products. Adjusted earnings of $1.98 per share for the quarter topped the Zacks Consensus Estimate of $1.89.
Revenues rose around 5% year over year to $2,419 million in the second quarter, beating the Zacks Consensus Estimate of $2,366 million.
Eastman Chemical's stock has gained 32.7% over a year, modestly outperforming the 31.9% gain of the industry it belongs to.
Eastman Chemical topped the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 5.8%. Is the company poised for another winning quarter? Let's see how things are shaping up for this announcement.
Factors to Watch For
Eastman Chemical, earlier this month, provided an update on its earnings expectations for full-year 2017, including preliminary expectations of the impact of an operational incident at the company’s Kingsport manufacturing plant.
The company noted that fundamental state of business in the third quarter was strong, which is also expected to continue into the fourth quarter. Additionally, Eastman Chemical expects the financial impact of recent hurricanes in the United States to be neutral, with impacts varying by segment.
Given these factors, Eastman Chemical expects adjusted earnings per share growth in 2017 to be toward the top end of the earlier projected range of 10-12% year over year, excluding the financial impact of the Kingsport operational incident.
Earlier this month, the company’s Kingsport coal gasification area suffered an operational incident. However, there were no reports of any adverse impact on the environment or on human health. The company noted that all areas of the manufacturing facility are reinstating normalcy with the exception of coal gasification operations.
Eastman Chemical is using alternative processes to continue operations of all downstream derivative facilities of coal gasification with repairing works being on track. Though the company is still assessing the financial impact of the incident, it is expected to affect operating earnings in the range of $50-100 million, mostly in fourth-quarter 2017.
Eastman Chemical’s high margin products and its aggressive cost management actions are likely to continue to drive its earnings in the third quarter. The company should gain from sustained growth of its high margins specialty products.
Eastman Chemical remains focused on cost-cutting and productivity actions. The company is aims to achieve $100 million of cost savings in 2017. Its cost reduction actions are expected to contribute around 50 cents to earnings per share in 2017.
Eastman Chemical should also gain from synergies of acquisitions, especially Taminco Corporation. The Taminco acquisition has provided attractive cost and revenue synergy opportunities.
However, the company faces challenges in fibers and ethylene pricing. Lower prices of acetate tow are hurting its Fibers unit. Weak tow pricing may continue to weigh on sales in this segment in the third quarter.
Moreover, the company expects ethylene prices to be lower in second-half 2017 vis-à-vis the first half. As such, ethylene margins are expected to remain under pressure in the to-be-reported quarter.
Eastman Chemical is also seeing a spike in raw materials costs, especially in its Chemical Intermediates segment. Raw materials costs headwind is expected to persist in the third quarter. Nevertheless, the company’s actions to increase selling prices of its products are expected to help it offset the impact of raw material cost inflation.
Eastman Chemical Company Price and EPS Surprise
Eastman Chemical Company Price and EPS Surprise | Eastman Chemical Company Quote
Earnings Whispers
Our proven model does not conclusively show that Eastman Chemical is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Eastman Chemical is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at $2.03. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Eastman Chemical currently carries a Zacks Rank #4 (Sell). We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some other companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Westlake Chemical Corporation (WLK - Free Report) has an Earnings ESP of +5.14% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
FMC Corporation (FMC - Free Report) has an Earnings ESP of +0.88% and a Zacks Rank #1.
Ingevity Corporation (NGVT - Free Report) has an Earnings ESP of +2.94% and sports a Zacks Rank #2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>