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EASTMAN CHEMICAL CO (EMN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered resilient but below-consensus results amid tariff-driven demand disruptions and an unplanned CI outage: revenue $2.287B and GAAP EPS $1.20; adjusted EPS $1.60 versus S&P consensus EPS ~$1.75 and revenue ~$2.304B, a miss on both lines . Values retrieved from S&P Global.*
  • Management guided Q3 adjusted EPS “around $1.25” and expects FY25 operating cash flow of ~$1B (down from ~$1.2B prior), with >$200M inventory reduction creating a $75–$100M asset-utilization headwind in H2 .
  • Additives & Functional Products (AFP) posted price/mix-driven strength; Advanced Materials (AM) held up despite weak auto/B&C end markets; Fibers and Chemical Intermediates (CI) were pressured by textiles softness, destocking, lower spreads, and an ~$20M outage impact in CI .
  • Circular platform momentum continued: Kingsport methanolysis set production records; debottlenecking plans target ~130% of current capacity and support pulling forward EBITDA, while second-facility options are being re-evaluated for capital efficiency .
  • Near-term stock reaction catalysts: estimate miss and lower cash flow guidance; clarity on tariff trajectory; execution on cost-reduction ($75–$100M) and CI recovery; methanolysis ramp progress .

What Went Well and What Went Wrong

  • What Went Well

    • AFP strength: sales +7% YoY on +4% price and +2% volume/mix; adjusted EBIT margin up to 19.9% (17.1% prior), driven by cost pass-through and stable end markets . “Stability of the price-cost relationship…part of why AFP performs well” .
    • Circular platform execution: Kingsport methanolysis set new production records and remains “on track to produce greater than 2.5x more recycled content than 2024” . Debottlenecking insights target ~130% capacity and support pulling forward EBITDA .
    • Cost program momentum: management targeting additional $75–$100M reductions, focusing on reliability, purchasing/MRO, energy efficiency, and variableizing costs without portfolio rationalization .

  • What Went Wrong

    • Estimate miss: adjusted EPS $1.60 vs ~$1.75 consensus and revenue $2.287B vs ~$2.304B; tariff-driven demand caution and pre-buy timing in Q2 weighed on AM and Fibers; CI impacted by ~$20M outage . Values retrieved from S&P Global.* .
    • Fibers weakness: sales -17% YoY on -16% volume/mix (China textiles slowdown, acetate tow destocking/capacity share shifts); adjusted EBIT margin fell to 29.6% (37.0% prior) .
    • CI pressure: sales -10% YoY on -5% volume/mix and -5% price; adjusted EBIT margin -6.5% (4.3% prior) amid lower spreads, higher energy/raw materials, and outage .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$2.245 $2.290 $2.287
GAAP Diluted EPS ($)$2.82 $1.57 $1.20
Adjusted Diluted EPS ($)$1.87 $1.91 $1.60
GAAP EBIT ($USD Millions)$349 $302 $222
Adjusted EBIT ($USD Millions)$305 $311 $275
Adjusted EBIT Margin (%)13.6% 13.6% 12.0%
Operating Cash Flow ($USD Millions)$540 ($167) $233

Segment breakdown (sales, adjusted EBIT, margins):

SegmentQ2 2024 Sales ($MM)Q2 2025 Sales ($MM)Q2 2024 Adj EBIT ($MM)Q2 2025 Adj EBIT ($MM)Q2 2024 Adj EBIT MarginQ2 2025 Adj EBIT Margin
Advanced Materials$795 $777 $131 $121 16.5% 15.6%
Additives & Functional Products$718 $769 $123 $153 17.1% 19.9%
Chemical Intermediates$515 $463 $22 ($30) 4.3% -6.5%
Fibers$330 $274 $122 $81 37.0% 29.6%

KPIs and balance sheet:

KPIQ4 2024Q2 2025
Net Debt ($USD Millions)$4,180 $4,703 (Jun 30)
Cash & Equivalents ($USD Millions)$837 $423 (Jun 30)
OCF ($USD Millions)$540 $233

Estimate comparison (S&P Global consensus vs actual):

MetricQ4 2024Q1 2025Q2 2025
EPS Estimate ($)1.57*1.89*1.75*
EPS Actual ($)1.87 1.91 1.60
Revenue Estimate ($MM)2,271.1*2,330.1*2,304.3*
Revenue Actual ($MM)2,245 2,290 2,287

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSQ2 2025$1.70–$1.90 Actual: $1.60 Miss vs guide
Adjusted EPSQ3 2025N/A“Around $1.25” Initiated (lower seasonal vs normal due to tariffs/utilization)
Operating Cash FlowFY 2025~$1.2B ~$1.0B Lowered
InventoryH2 2025N/AReduce >$200M; creates $75–$100M asset-utilization headwind (~$50M in Q3) New action / headwind
CI EarningsH2 2025N/AExpected increase after Q2 outage Raised within H2
Cost ReductionFY 2025–2026~$75M net of inflation (FY25) Additional $75–$100M targeted Raised program
CapExFY 2025~ $550M Maintain low/efficient; delay step-up for next methanolysis (debottlenecking first plant) Maintained/optimized
DividendQ3 2025Prior run-rateDeclared $0.83 per share (payable Oct 7) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Tariffs/macro demandHeightened uncertainty; moved to quarterly EPS guidance; Q2 guide called out ~$30M tariff impact and weaker seasonal uptick Customers “holding orders” amid tariff escalation; mid-single-digit demand drop expected H2; cannot annualize H2; Q3 EPS “~$1.25” Deteriorating visibility; caution rising
Circular (methanolysis)Strong Q4 ops; Q1 best uptime/production; FY25 circular EBITDA $75–$100M targeted Plant set records; debottlenecking to ~130%; pulling forward EBITDA; evaluating capital-efficient site options Positive execution; capital efficiency focus
Cost reductionFY25 reduce structural costs to offset inflation Targeting additional $75–$100M; reliability, purchasing/MRO, energy, variableization Accelerating
CI structural actionsSpreads improved in late 2024; mixed in Q1 Q2 outage (~$20M) and weak spreads; E2P project to add $50–$100M EBIT over cycle, reduce volatility Near-term weak; medium-term improvement plan
Auto/B&C end marketsEnd of destocking in late 2024; Q1 cautious Aftermarket films solid; OEM/interlayers challenged; auto prod low-single-digit down in H2 Mixed; continued caution
Fibers/textilesTow pricing stable; destocking; Naia growth offset in 2024 Textiles ~$20M headwind; tow destocking and capacity share shifts; energy cost headwind; plan to stabilize in 2026 Weaker near term

Management Commentary

  • “We project third-quarter adjusted earnings per share to be around $1.25… We expect to generate full-year operating cash flow of ~$1 billion… executing plans to reduce inventory by greater than $200 million… creating a $75 million to $100 million asset utilization headwind” .
  • “The Kingsport methanolysis facility continues to operate well, and we remain on track to produce greater than 2.5 times more recycled content than 2024” .
  • “We can debottleneck the plant… line of sight to getting the plant to 130%, and… pull EBITDA forward from the second plant into the first” .
  • “Ethylene-to-propylene… convert one of our existing crackers… dramatically improve earnings by $50 to $100 million in EBIT over the cycle… reduces volatility” .
  • “Most of the [AFP] increase in price was driven by our cost pass through contracts… stability of the price cost relationship” .
  • “Total impact of the unplanned outage reduced EBIT by approximately $20 million [CI]” .

Q&A Highlights

  • Tariff uncertainty and demand: Customers “holding orders” vs canceling; management cautioned mid-single-digit demand decline in H2 and emphasized that H2 cannot be annualized for 2026 outlook .
  • Methanolysis ramp: Debottlenecking to ~130% capacity; contract with PepsiCo remains intact; considering alternative sites and scope reductions after DOE grant issues .
  • Cost actions: Additional $75–$100M savings targeted; no broad plant shutdowns; utilization headwinds in 2025 turn to tailwinds in 2026 with stabilization .
  • Segment color: AM sequential decline partly due to pre-buy and weak end markets; AFP normal seasonality; CI recovery expected post-outage; fibers impacted by textiles and energy .
  • Cash flow/working capital: Plan to reduce inventory >$200M; OCF ~$1B in 2025 despite earnings decline due to WC release .

Estimates Context

  • Q2 2025 missed on both EPS and revenue versus S&P Global consensus: adjusted EPS $1.60 vs ~$1.75; revenue $2,287M vs ~$2,304M. Q1 2025 was an EPS beat and revenue miss; Q4 2024 was an EPS beat and slight revenue miss. Values retrieved from S&P Global.*
  • Implications: Street likely to lower H2’25 and FY’25 cash flow estimates to ~$1.0B and reset Q3/Q4 EPS toward ~$1.25, with sensitivity to tariff outcomes and execution on cost/utilization levers .

Key Takeaways for Investors

  • Near-term earnings reset: Q3 adjusted EPS guided “around $1.25” and FY25 OCF lowered to ~$1B; expect estimate revisions and focus on tariff trajectories .
  • Portfolio resilience: AFP price-cost stability and AM specialty plastics strength offset some macro/auto/B&C headwinds; CI recovery expected post-outage .
  • Structural improvement levers: E2P conversion project ($50–$100M EBIT over cycle) and additional $75–$100M cost reductions support 2026 earnings normalization potential .
  • Circular platform is a differentiator: Methanolysis debottlenecking to ~130% and customer adoption underpin medium-term EBITDA growth; capital-efficient second-facility options in flight .
  • Working capital and cash priority: Inventory reduction >$200M creates H2 utilization headwind but supports ~$1B OCF in 2025; sets up tailwind potential in 2026 .
  • Watch fibers/textiles trajectory: China textiles softness (~$20M headwind) and tow destocking continue near-term; management aims to stabilize with customer moves and energy actions .
  • Trading lens: Near-term pressure from miss/lower OCF guide, but catalysts include CI recovery, cost reductions, and methanolysis ramp; tariff developments are key swing factor .