Eastman Chemical (NYSE:EMN) said it expects stronger earnings growth in the second half of 2026 than it anticipated in April, citing volume gains, improved asset utilization and price-cost benefits across its specialty businesses. During its second-quarter earnings call, Chief Executive Officer Mark Costa said the company is not forecasting a broad recovery in weak discretionary markets such as automotive, consumer durables and certain aftermarket categories.
“We’re not expecting any improvement in the end markets” tied to weak discretionary demand, Costa said. However, he said Eastman continues to see modest growth in stable end markets and has not yet observed a material demand impact from the Middle East conflict.
Advanced Materials growth supported by innovation and circular products
The company expects Advanced Materials earnings to benefit in the second half from higher production utilization, pricing actions and growth in its circular-products platform. Eastman had reduced finished-goods inventory during the first half while securing supplies of paraxylene, creating a utilization headwind that Costa said should reverse as the company converts those materials into finished goods.
Costa also said a new Tritan production line is coming online as Eastman had been constrained by Tritan capacity and had shifted one existing line to serve polyethylene terephthalate, or PET, growth. The company expects price-cost dynamics in the segment to become a tailwind in the second half as previously implemented price increases catch up with raw-material costs.
For Eastman’s Renew portfolio, Costa said revenue growth exceeded $100 million in the first half and more than doubled from the prior year. Growth was roughly evenly split between specialty products and recycled PET, or rPET, although specialty products accounted for more of the first-half contribution and PET is expected to account for more of the second-half ramp.
Eastman modestly lowered its circular-revenue outlook to below the range previously provided, citing both rPET production limitations and slower customer purchasing. Costa said customers remain committed to recycled content, but a weak economy has made them more disciplined about the premiums they pay.
“We’re not seeing anyone back away from their commitments to recycled content,” Costa said. He added that demand for Eastman’s rPET supports the company’s view that its product offers better quality and clarity than mechanically recycled alternatives.
Methanolysis platform remains a long-term focus
Costa rejected the view that Eastman has materially redirected its strategy away from methanolysis, the chemical recycling process used at its Kingsport facility. He said the company continues to view the technology as a significant long-term growth platform, despite a weaker economy and increased capital costs.
The Kingsport methanolysis plant is operating reliably, with yields above 90%, according to Costa. Eastman believes it can debottleneck the facility by 30% to reach 130,000 tons of capacity, or 130% of design capacity. Costa said the asset had been operating at about 50% utilization last year and utilization has increased with improved demand in 2026.
Polymer capacity, rather than methanolysis capacity, is currently the constraint for rPET growth, Costa said. Eastman is evaluating additional ways to optimize polymer assets to support further PET production next year.
Regarding a potential Texas project, Costa said higher capital costs and the loss of a Department of Energy grant prompted Eastman to develop a more capital-efficient approach. The company expects to provide additional details later and said the Kingsport expansion opportunity allows it to push out the next major capital commitment until 2028.
Eastman still expects the first circular asset to eventually generate $200 million of EBITDA, although Costa said reaching that level will take longer than previously hoped because of current economic conditions. He said circular-products margins are above the company average but did not provide a contribution-margin figure.
Other segments and cost actions
In Chemical Intermediates, Costa said most of the year-over-year volume increase reflected the absence of major planned and unplanned shutdowns that limited production in the prior year. Eastman also gained some North American share in higher-margin markets and sold stored ethylene into what Costa described as attractive market conditions.
He cautioned that Chemical Intermediates spreads could moderate in the second half and described the outlook as highly uncertain because of developments involving the Middle East and the Strait of Hormuz. Eastman expects to retain most of the volume share it gained, though the profitability of that volume could change with market spreads.
Advanced Additives & Functional Products continued to show resilient margins, supported by a portfolio weighted toward stable markets including pharmaceuticals, water treatment, agriculture, personal care and aviation, Costa said. He pointed to favorable industry structures, strong competitive positions and cost-passthrough arrangements in certain businesses. Eastman intends to maintain specialty-product prices as higher raw-material, energy and distribution costs continue to flow through.
In Fibers, Eastman expects tow volumes to rise materially in the second half as customers increase purchases to meet annual minimum-volume commitments. Costa said annual tow volumes should be relatively stable compared with last year. Textile volumes, which were weak in the first half, are expected to improve enough in the second half to bring the business roughly even with 2025 levels.
Chief Financial Officer Willie McLain said Eastman remains on track to deliver $125 million to $150 million of cost reductions net of inflation in 2026. The largest benefits are expected in Advanced Materials and Chemical Intermediates, with smaller contributions from Fibers and Additives & Functional Products. He said the company’s focus for 2027 will include at least offsetting inflation.
Cash flow, maintenance and portfolio strategy
McLain said higher pricing is expected to add about $500 million to revenue this year. Working capital consumed less cash in the first half than in the prior-year period, although Eastman expects to recover less working capital in the second half than it did last year. McLain said the company expects to approach $900 million, compared with $970 million under the company’s prior comparison.
Eastman completed a major maintenance shutdown of its Kingsport coal gasifier and related stream in the second quarter. Costa said the work was a significant sequential headwind for Fibers and Chemical Intermediates, but its cost will not repeat next year.
On acquisitions and divestitures, Costa said Eastman is evaluating opportunities as industry activity increases and valuations become more rational. He emphasized that the company will remain disciplined, citing its past acquisitions, divestitures of underperforming businesses and continuing investment in organic growth through innovation.
About Eastman Chemical (NYSE:EMN)
Eastman Chemical Company (NYSE: EMN) is a global specialty materials company that develops, manufactures and markets a broad range of advanced materials, chemicals and fibers. Its product portfolio spans performance additives, functional products, and engineered plastics designed to enhance the durability, appearance and performance of end products across diverse industries.
The company’s main business activities include the production of specialty chemicals used in adhesives, coatings, building materials and consumer care applications, as well as high-performance plastics for packaging, automotive and electronics markets.
