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Category: Stock Market and Eastman Chemicals
Date: 28 October 2019 Stock Price: $76.28 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Eastman Chemicals, a company that produces a broad range of products and items used by people on a daily basis, in sectors such as transport, building and construction and consumables.
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About Eastman Chemicals
Eastman is a global advanced materials and specialty additives company that produces a broad range of products found in items people use every day. With a portfolio of specialty businesses, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. Its marketdriven approaches take advantage of world-class technology platforms and leading positions in attractive end-markets such as transportation, building and construction, and consumables. Eastman focuses on creating consistent, superior value for all stakeholders. As a globally diverse company, Eastman serves customers in more than 100 countries and had 2018 revenues of approximately $10 billion. The company is headquartered in Kingsport, Tennessee, USA and employs approximately 14,500 people around the world.
Overview of Eastman's 3rd quarter 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Sales: $2.325 billion (down from $2.547 billion for the same period of the previous year)
- Sales decreased by -8.71% over the last 12 months
- Cost of sales: $1.751 billion (down from $1.819 billion for the same period of the previous year)
- Total expenses decreased by -3.7% over the last 12 months
- Net income: $266 million (down $412 million from for the same period of the previous year)
- Diluted earnings per share: $1.93 (down from $2.89 for the same period of the previous year)
- Diluted weighted-average shares outstanding: 137.8 million (down from 142.4 million for the same period of the previous year)
- Cash and cash equivalents: $207 million
- Cash and cash equivalents per share: $1.50
- Cash and cash equivalents makes up 1.97% of Eastman's market capital
- Cash generated from operations: $416 million
- Cash generated from operations per share: $3.01
- Free cash flow: $306 million (up from $258 million for the same period of the previous year)
Eastman Chemicals' management commentary on their 3rd quarter 2019 results
KINGSPORT, Tenn., October 24, 2019 – Eastman Chemical Company (NYSE: EMN) announced its third-quarter 2019 financial results.
“In the third quarter, global economic conditions worsened as uncertainty related to trade issues escalated and impacted consumer discretionary markets such as transportation and consumer durables, which was somewhat offset by our innovation and market development efforts,” said Mark Costa, Board Chair and CEO. “We continue to make strong progress growing new business revenue from innovation and market development initiatives, particularly in the Advanced Materials segment. In addition, we remain focused on aggressively managing costs. We also delivered strong free cash flow, which is a priority for us in this difficult environment.”
The company continues to expect to approach $1.1 billion of free cash flow (cash from operating activities less net capital expenditures) in 2019. Priorities for uses of available cash include payment of the quarterly dividend, repayment of debt, funding targeted growth initiatives and repurchasing shares. Outlook Commenting on the outlook for full-year 2019, Costa said: “For the first nine months of the year, we’ve remained focused on what we can control in this difficult business climate. We have increased new business revenue from innovation, particularly in the Advanced Materials segment, as well as continued to aggressively manage costs. However, we have seen business conditions worsen due to global trade uncertainty and other macro factors. As a result, we are now expecting lower sales volume and lower capacity utilization in the fourth quarter. Taking all of this together, assuming the current economic conditions continue, we expect 2019 adjusted EPS to be between $7.00 and $7.20 and free cash flow to approach $1.1 billion.”
The full-year 2019 projected earnings exclude any non-core, unusual, or nonrecurring items in the remaining three months of 2019 and assume that the adjusted tax rate detailed in Tables 4A and 4B for first nine months 2019 will be the actual rate for fullyear 2019. Our 2019 financial results forecasts do not include non-core items (such as mark-to-market pension and other postretirement benefit gain or loss) or any unusual or non-recurring items, and we accordingly are unable to reconcile projected full-year 2019 earnings excluding non-core and any unusual or non-recurring items to reported GAAP earnings without unreasonable efforts.
“In the third quarter, global economic conditions worsened as uncertainty related to trade issues escalated and impacted consumer discretionary markets such as transportation and consumer durables, which was somewhat offset by our innovation and market development efforts,” said Mark Costa, Board Chair and CEO. “We continue to make strong progress growing new business revenue from innovation and market development initiatives, particularly in the Advanced Materials segment. In addition, we remain focused on aggressively managing costs. We also delivered strong free cash flow, which is a priority for us in this difficult environment.”
The company continues to expect to approach $1.1 billion of free cash flow (cash from operating activities less net capital expenditures) in 2019. Priorities for uses of available cash include payment of the quarterly dividend, repayment of debt, funding targeted growth initiatives and repurchasing shares. Outlook Commenting on the outlook for full-year 2019, Costa said: “For the first nine months of the year, we’ve remained focused on what we can control in this difficult business climate. We have increased new business revenue from innovation, particularly in the Advanced Materials segment, as well as continued to aggressively manage costs. However, we have seen business conditions worsen due to global trade uncertainty and other macro factors. As a result, we are now expecting lower sales volume and lower capacity utilization in the fourth quarter. Taking all of this together, assuming the current economic conditions continue, we expect 2019 adjusted EPS to be between $7.00 and $7.20 and free cash flow to approach $1.1 billion.”
The full-year 2019 projected earnings exclude any non-core, unusual, or nonrecurring items in the remaining three months of 2019 and assume that the adjusted tax rate detailed in Tables 4A and 4B for first nine months 2019 will be the actual rate for fullyear 2019. Our 2019 financial results forecasts do not include non-core items (such as mark-to-market pension and other postretirement benefit gain or loss) or any unusual or non-recurring items, and we accordingly are unable to reconcile projected full-year 2019 earnings excluding non-core and any unusual or non-recurring items to reported GAAP earnings without unreasonable efforts.
Eastman Chemicals (NYSE: EMN) stock price history
The image below, obtained from Google, shows the stock price history of Eastman over the last 5 years. And its not been a good time for Eastman stockholders. 5 years ago the stock was trading at around $80.80 a stock and its currently trading at $76.28 a stock. That's a negative return of -5.59% provided to Eastman stockholders over the last 5 years. The trust impact of holding Eastman stock though is the opportunity cost of holding it. Basically what Eastman stockholders lost out on while holding Eastman stock. The opportunity cost of holding Eastman stock instead of say Netflix that returned over 300% over a 5 year period becomes significant.
The stock of Eastman is trading at a lot closer to its 52 week high of $86.18 than it is to its 52 week low of $61.22 which to us is a clear indication that the short term sentiment and momentum of Eastman's stock is positive right now.
The stock of Eastman is trading at a lot closer to its 52 week high of $86.18 than it is to its 52 week low of $61.22 which to us is a clear indication that the short term sentiment and momentum of Eastman's stock is positive right now.
Recent coverage of Eastman Chemicals
The extract below discusses the latest news regarding Eastman Chemicals as obtained from TheStreet,com
KINGSPORT, Tenn., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Today Eastman (NYSE: EMN) took a significant and definitive step forward to accelerate the circular economy. The company has begun commercial operation of an innovative chemical recycling technology that will help solve one of the world's most pressing problems - waste plastic. Eastman's carbon renewal technology breaks down waste plastics into molecular building blocks like carbon, oxygen and hydrogen. Carbon renewal technology is a game-changer for recycling because it provides an end-of-life solution for many plastics from a variety of sources, such as single-use plastics, textiles, and carpet, that traditional mechanical recycling methods cannot process. As a result, many of these plastics are landfilled or incinerated. Eastman expects to use up to 50 million pounds of waste plastic in carbon renewal technology operations in 2020, and projects are currently underway to significantly expand that amount. "Eastman is a company of problem solvers, and our people have the capabilities to tackle the world's biggest problems," said Mark Costa, Board Chair and CEO.
KINGSPORT, Tenn., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Today Eastman (NYSE: EMN) took a significant and definitive step forward to accelerate the circular economy. The company has begun commercial operation of an innovative chemical recycling technology that will help solve one of the world's most pressing problems - waste plastic. Eastman's carbon renewal technology breaks down waste plastics into molecular building blocks like carbon, oxygen and hydrogen. Carbon renewal technology is a game-changer for recycling because it provides an end-of-life solution for many plastics from a variety of sources, such as single-use plastics, textiles, and carpet, that traditional mechanical recycling methods cannot process. As a result, many of these plastics are landfilled or incinerated. Eastman expects to use up to 50 million pounds of waste plastic in carbon renewal technology operations in 2020, and projects are currently underway to significantly expand that amount. "Eastman is a company of problem solvers, and our people have the capabilities to tackle the world's biggest problems," said Mark Costa, Board Chair and CEO.
Eastman Chemicals (NYSE: EMN) latest stock valuation
So what is Eastman Chemicals stock worth based on the release of their latest earnings report? Based on the earnings report and fiscal guidance provided by Eastman Chemicals our our valuation models provide a target (full value) price for Eastman Chemicals stock at $106 a stock. We therefore believe that the stock of Eastman Chemicals is undervalued
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $106. Therefore we believe a good entry point into Eastman Chemicals stock is at $95.4 or below. We expect the stock price of Eastman Chemicals to increase to levels to closer to our target price in coming weeks and months.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $106. Therefore we believe a good entry point into Eastman Chemicals stock is at $95.4 or below. We expect the stock price of Eastman Chemicals to increase to levels to closer to our target price in coming weeks and months.
Next earnings release date for Eastman Chemicals
It is expected that Eastman Chemicals 4th quarter and full year results of their 2019 fiscal year will be released in late January 2020.