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Scotiabank analyst Ben Isaacson downgraded Eastman Chemical to Sector Perform from Outperform with a price target of $90, down from $100. The analyst believes Eastman has a low likelihood for share outperformance in the near term. The firm does not see earnings growth through 2024, after accounting for self-help measures and expects some lower raw materials and energy tailwinds in Q2. As such, the stock could be range-bound, Scotiabank tells investors in a research note.
Vertical Research analyst Kevin McCarthy downgraded Eastman Chemical to Hold from Buy with a price target of $92, down from $94, stating that the firm sees "too many headwinds."
Mizuho analyst Kieran de Brun lowered the firm's price target on Eastman Chemical to $82 from $85 and keeps a Neutral rating on the shares. The analyst expects de-stocking to be prevalent in Q1 and weaker end-market demand to remain throughout 2023.
Barclays analyst Michael Leithead raised the firm's price target on Eastman Chemical to $87 from $82 and keeps an Equal Weight rating on the shares following the Q4 results.
Wells Fargo analyst Michael Sison raised the price target on Eastman Chemical to $95 from $80 and keeps an Equal Weight rating on the shares. While Eastman Chemical's buildout of its circularity footprint remains on track, the firm expects shares to be driven more by near-term results, where Q1 guidance was weak and the full year guidance looks challenging.
Commenting on the outlook for full-year 2023, Mark Costa, Board Chair and CEO, said: "We enter 2023 during a challenging period for the global economy characterized by significant inventory destocking, soft end-market demand, and uncertainty about the full year. As we developed our outlook, we included volume/mix expectations that reflect a manufacturing recession scenario that began in the fourth quarter. We expect aggressive inventory destocking to predominantly conclude in the first quarter with modest volume recovery in the back half of the year. In this context, we are taking actions to reduce manufacturing, supply chain and non-manufacturing costs by a total of more than $200 million in 2023, net of inflation. We intend to maintain our demonstrated price discipline in our specialty product lines in order to recover spreads. Our raw material, energy and distribution costs increased by approximately $1.3 billion in 2022 and we expect these costs to moderate in 2023. We also expect significant improvement in our Fibers earnings to more sustainable levels. And our innovation wins will create growth above end markets through the year. Pension and other post-employment benefits costs are expected to increase by approximately $110 million and the annualized impact of a strong U.S. dollar is also expected to be a headwind. Based on this economic scenario and the actions that we are taking, we expect to grow adjusted 2023 EPS by between 5 and 15 percent, excluding the approximately $0.75 pension headwind. We are also taking a range of actions to improve our operating cash flow to be approximately $1.4 billion."
Reports Q4 revenue $2.37B, consensus $2.44B. "We ended the year with a challenging fourth quarter primarily due to lower demand in key end markets and geographies, customer inventory destocking beyond normal seasonality, and limited benefit from lower raw material and energy costs in this reduced demand environment. Despite the significant challenges in the fourth quarter and throughout the year, we demonstrated commercial excellence in our pricing, made progress on new business revenue growth, and returned significant cash to shareholders. We also made significant progress on our circular platform during the year, and this remains an exciting opportunity for Eastman to create considerable value as a leader in providing a solution for the global plastic waste crisis. We remain confident in the resiliency of our portfolio and the sustainability of our strong cash flow going forward," said Mark Costa, Board Chair and CEO. "In fourth quarter, primary demand slowed, destocking accelerated across all end markets, and the rapid spread of COVID-19 in China weakened demand at the end of the fourth quarter, adjusted EPS included a negative impact of approximately $0.20 from foreign currency exchange rates, and adjusted EPS included a negative impact of approximately $0.15 resulting from Winter Storm Elliott, Controllable actions give confidence we can deliver a strong 2023, including cost reductions of more than $200 million net of inflation," the company stated.
Deutsche Bank analyst David Begleiter downgraded Eastman Chemical to Hold from Buy with a price target of $96, up from $90, in conjunction with his December quarter earnings preview. Eastman has had strong absolute and relative share price performance, with shares up 12% year-to-date and 29% since late September, noted Begleiter. He believes Eastman's exposures to building and construction and consumer markets, coupled with uncertainty around potential recessions in the U.S. and Europe, will drive management to provide cautious guidance when the company reports Q4 results in January, Begleiter tells investors.
BofA analysts Matthew DeYoe and Steve Byrne are shaking up their ratings in the U.S. Chemicals space to take a "more offensive stance," while refraining from going "all in" on risk assets until they see more confirmation from macro and commodity markets, they tell investors in a sector note. In that context, the team upgraded Chemours (CC) and Eastman Chemical (EMN) to Buy from Neutral, double upgraded Livent (LTHM) to Buy from Underperform, and raised both Dow Inc. (DOW) and Corteva (CTVA) to Neutral from Underperform. Meanwhile, to keep at least 20% of their coverage at Underperform, they downgraded Univar (UNVR) to Underperform from Buy and also double downgraded IFF (IFF) to Underperform.
