Celanese (CE) Up 25% in 6 Months: What's Driving the Rally?
Celanese Corporation’s CE shares have popped 25.3% over the past six months. The company has also outperformed its industry’s rise of 11.2% over the same time frame. It has also topped the S&P 500’s 8.2% rise over the same period.
Let’s dive into the factors behind this leading chemical and specialty materials maker’s stock price appreciation.
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CE Gains on Acquisitions & Productivity
Celanese, a Zacks Rank #3 (Hold) stock, is gaining from its productivity measures, investments in organic projects and strategic acquisitions amid headwinds from demand softness and customer destocking in certain end markets.
The company is actively pursuing acquisitions, which are providing it opportunities for additional growth, investment and synergies. The acquisition of the majority of DuPont’s Mobility & Materials (“M&M”) business has allowed Celanese to enhance its growth in high-value applications. M&M contributed $125 million to the company’s operating EBITDA in third-quarter 2023, up 15% sequentially. Celanese sees a sequential increase in contribution in the fourth quarter.
The acquisitions of SO.F.TER., Nilit and Omni Plastics are also expected to contribute to earnings expansion in the company's Engineered Materials segment. The Elotex acquisition also strengthened the company’s position in the vinyl acetate ethylene emulsions space. Moreover, the purchase of Exxon Mobil's Santoprene business broadened the company’s portfolio of engineered solutions and enables it to offer a wider range of functionalized solutions to targeted growth areas, including future mobility, medical and sustainability.
Celanese also remains focused on executing its productivity programs that include the implementation of a number of cost reduction capital projects. Productivity actions are expected to support to its margins in 2023.
The company is proactively implementing strategic initiatives recognizing the volatility and unpredictability of the current market landscape and competitive environment. These actions involve strengthening its commercial teams, aligning production and inventory levels with prevailing demand, implementing cost-saving measures, and optimizing cash flow. These endeavors are expected to result in robust cash generation and a continuation of earnings growth. The company's incremental cost actions are expected to deliver $60-$80 million in savings in the second half of 2023.
Celanese also continues to generate strong cash flows and is focused on boosting shareholders’ value. It generated operating cash flow of $1.8 billion and free cash flow of $1.3 billion in 2022. Cash provided by operating activities was $403 million and free cash flow was $268 million in the third quarter of 2023. CE also returned roughly $228 million to shareholders through dividend payouts during the first nine months of 2023. Moreover, the company reduced its net debt by $758 million in the third quarter.
Celanese Corporation Price and Consensus
Celanese Corporation price-consensus-chart | Celanese Corporation Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Denison Mines Corp. DNN, Axalta Coating Systems Ltd. AXTA and The Andersons Inc. ANDE.
Denison Mines has a projected earnings growth rate of 100% for the current year. DNN has a trailing four-quarter earnings surprise of roughly 225%, on average. The stock is up around 55% in a year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the Zacks Consensus Estimate for Axalta Coating Systems’ current year has been revised upward by 8.2%. AXTA, carrying a Zacks Rank #1, beat the Zacks Consensus Estimate in three of the last four quarters while missing in one quarter, with the average earnings surprise being 6.7%. The company’s shares have gained 19% in the past year.
Andersons currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for ANDE's current-year earnings has been revised 5.1% upward over the past 60 days. Andersons beat the Zacks Consensus Estimate in three of the last four quarters. It delivered a trailing four-quarter earnings surprise of 32.8%, on average. ANDE shares have rallied around 32% in a year.
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