Eastman Chemical Co. (EMN) has raised its full year 2009 earnings guidance to $3.50 per share from the initial guidance of $2 to $3 per share, driven by an expected strong growth in its core business. The company is hoping to deliver about 20% or over $6 per share growth in annual earnings by 2012, as the economy recovers completely.

The Zacks Consensus Estimate is pegged at $3.22 for 2009 and at 93 cents for the fourth quarter. Recently, Eastman’s close peers, Dow Chemical Company (DOW) and Dupont (DD) have also predicted strong growth in earnings.

Eastman stands to benefit from its business restructuring and cost-cutting measures, which are expected to result in cost savings of more than $200 million for the full year 2009. Eastman’s earnings of $1.38 per share in the third quarter of 2009 had bettered the Zacks Consensus Estimate of $1.13 per share helped by lower costs.

The company managed margins by reducing its operating costs. However, lower selling prices and volumes across all major segments resulted in a 21% year-over-year fall in Eastman’s top line of $1.3 billion for the quarter. Eastman’s core businesses Incorporatedluding Coatings, Adhesives, Specialty Polymers and Inks, Fibers, Performance Chemicals and Intermediates as well as Specialty Plastics suffered on weak demand from the automotive, building and construction, and packaging markets.

Tennessee-based Eastman, which makes chemicals, plastics and fibers used in everything from paints to furniture, expects to benefit from a better product mix and cost reduction measures in the fourth quarter of 2009. However, the company expects volatility in raw material and energy costs and a decline in sales volume due to normal seasonality having a negative affect on the upcoming quarter.

Eastman expects the growth in earnings investments in sustainable products and emerging markets. The company is eyeing the cigarettes market, which is witnessing high growth on the back of strong demand from Russia and China. Strong demand for cigarettes will help earnings in the company’s fibers unit, which also produces base materials for clothing. Eastman produces acetate tow, used to make filters for cigarettes. In the Performance Polymer segment, Eastman is expecting operating earnings of $25 to $50 million by monetizing IntegRex technology investment through licensing.

This apart, Eastman has about $117 million remaining on a share repurchase allocation, and intends to use that up in the next few years. Eastman is more open now to acquisitions or joint ventures than it had previously been, due in part to a new growth strategy. The company recently launched a $250 million note offering for fund growth projects.

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