In an updated research report on US chemical producer Eastman, analysts at Zacks Equity Research say they expect the company to benefit from its strategic acquisitions, capacity additions and cost-cutting measures, while at the same time pointing to its exposure to volatile raw material pricing and currency headwinds.

Although Eastman saw its profit tumble in the 2014 fourth quarter, due to a sizable loss on pension and postretirement benefit plans, its adjusted earnings topped the Zacks Consensus Estimate, and the company expects adjusted earnings in 2015 to be similar to last year. Year-on-year sales growth in the last quarter, with gains across most businesses also beat expectations.

Zacks' analysts called Eastman's acquisition of Solutia "a major step" in its efforts to gain a foothold in emerging markets, especially in Asia-Pacific, and said the acquisition of BP's aviation turbine engine oil business will enable the company to better address the needs of the global aviation industry.

The recently completed purchase of specialty chemical company Taminco Corporation for $2.8 billion also is seen as strengthening Eastman's position in attractive niche end-markets including food, feed and agriculture, where Taminco has a strong presence.

Eastman should also gain from capacity additions, Zacks say, including the new acetate tow joint venture investment in China, which is now producing commercial quantities. Moreover, the analysts say, the company is seeing strong adoption of Tritan copolyester products, for which it is expanding capacity at its Kingsport, Tennessee headquarters. The company is also expanding capacity for its Therminol heat transfer fluids.

The flip side of this, the report says, is that Eastman could see lower demand for acetate tow in first-half 2015, due to inventory destocking at customers. Moreover, falling oil prices and expected lower demand in heat transfer fluids are expected to affect Eastman's specialty fluids and intermediates business this year. The company is also witnessing competitive pressure in its Adhesives and Plasticizers segment.

The research team notes also that Eastman remains exposed to volatility in raw material costs (particularly for propane), and pricing pressure, which could worsen with the strengthening of the dollar against the euro. Uncertainty regarding the timing of a recovery in Europe is seen to represent another concern for the US chemical producer.