Deutsche Bank Markets Research Elating Buy North America United States Industrials Chemicals / Specialty Eastman Chemical EMN N PAN UN NYS EMN Share Price Decline Unwarranted C,N1C(!f111; overdone. Valuation compelling at 1O 1EE vs Do:: at 14 tihi Bev Eastman shares fell 8% despite a solid 02 beat and the reaffirming of '14 guidance as investors focused on i) new '15 guidance of $7.50-$8.00 (vs $8 previously) and ii) a lowering of '14 Fibers (largest and highest margin segment) EBIT guidance by 6%. We believe investor concerns are overdone as i) Eastman has been backing away from the $8 target for months and, as evidenced by consensus of $7.77, was not viewed as achievable either and ii) Fibers is under-earning in '14 due to destocking, lower demand and reduced operating rates. With valuation a compelling 10.6x '15 EPS vs 14.8x for Dow and Q2 evidencing a more predictable and resilient earnings generator, Buy. O2 bears by $O U. " 14 guidance of 56.70-37 .00 rear firmed (cons. 36 931 Eastman reported Q2 EPS of $1.92, up 7%, and $0.08 or 4% above consensus. An unplanned outage at Eastman's Kingsport plant reduced sales by $10MM (in Specialty Fluids & Intermediates {SFI)), EBIT by S10MM (evenly divided between Advanced Mat'ls, Fibers and SFI) and EPS by $0.05. Prior to the outage, consensus was $1.88. A lower than expected tax rate added $0.01. The upside was driven by stronger than expected results in Adhesives & Plasticizers (AP) and SFI. Sales rose 1% on flat volumes and price while FX added 1%. EBIT fell 3% to $441MM while margins compressed 70bps YoY (+130 000) to 17.9% on higher propane costs. Eastman repurchased $100MM of stock in 02 and has $640MM left under its $16 authorization. Eastman reaffirmed its full year guidance range of $6.70-$7.00, up 4-9% (cons: $6.93). Lovetting 145 EPS by 0.05 to 36.90•. Lowe' ins '155 EPS by SO OS to $y.70 Notwithstanding a solid Q2 release, Eastman shares fell 8% due to concerns over lower