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Celanese (CE) Up 1.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Celanese (CE). Shares have added about 1.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Celanese due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Celanese's Q2 Earnings Top, Revenues Lag Estimates

Celanese logged earnings from continuing operations of $1.67 per share in second-quarter 2019, down from $2.52 in the year-ago quarter.

Barring one-time items, adjusted earnings were $2.38 a share, down from $2.90 in the year-ago quarter. It, however, topped the Zacks Consensus Estimate of $2.36.

Revenues of $1,592 million fell roughly 14% year over year and lagged the Zacks Consensus Estimate of $1,624.6 million. The company witnessed a challenging business environment during the second quarter. It saw weak demand and accelerated industry destocking in the quarter.

Segment Review

Net sales in the Engineered Materials unit were $593 million in the quarter, down 11% year over year. Sales were hurt by lower volumes and unfavorable currency impact. Volumes were impacted by demand weakness and destocking. The company commercialized 1,177 projects during the quarter.  

The Acetyl Chain segment posted net sales of $865 million, down around 18% year over year. Sales were affected by reduced volumes and pricing as well as unfavorable currency impact.

Net sales in Acetate Tow segment were $164 million, essentially flat year over year. Volumes and prices were stable year over year in the quarter.

Financials

Celanese ended the quarter with cash and cash equivalents of $491 million, down around 31% year over year. Long-term debt was up roughly 7% year over year to $3,444 million.

Celanese generated operating cash flow of $424 million and free cash flow of $356 million during the quarter. Capital expenditure was $65 million for the quarter. Moreover, the company returned $378 million to shareholders through dividends and share repurchases during the reported quarter.

Outlook

Celanese backed its adjusted earnings per share guidance of roughly $10.50 for 2019, considering that underlying fundamentals will improve later this year.

The company noted that it will remain focused on strengthening its businesses by executing its productivity programs and strategically investing in high-return organic projects. Celanese is on track to commercialize more than 4,000 projects in 2019.
 
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Celanese has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Celanese has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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