Celanese (CE) Down 3.7% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Celanese Corporation CE. Shares have lost about 3.7% in that time frame.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 drivers.
Celanese Beats Earnings and Revenue Estimates in Q3
Celanese kept its earnings streak alive with a beat in third-quarter 2017. The company logged adjusted earnings per share of $1.93 in the reported quarter, up 15.6% from $1.67 reported a year ago. The figure was slightly above the Zacks Consensus Estimate of $1.92.
Celanese reported sales of $1,566 million for the quarter, up roughly 18.4% year over year. Sales also beat the Zacks Consensus Estimate of $1,511 million. The company benefited from commercial execution in the Acetyl Chain unit and productivity gains in the quarter.
Segment Review
Material Solutions: Within this segment, the Advanced Engineered Materials unit delivered operating profit of $97 million and record adjusted EBIT of $147 million.
In the third quarter, 585 projects were commercialized. Tow volume and pricing declined in the reported quarter mainly due to lower industry capacity utilization rates and outpaced productivity gains in the quarter. The Consumer Specialties unit’s performance suffered a decline on a year-over-year basis.
Acetyl Chain: The unit witnessed growth in profitability despite operational and supply chain disruptions in the Gulf Coast caused by Hurricane Harvey. The success of commercial actions mainly in Asia as well as continued strength in global acetyls lead to higher pricing as compared to the year-ago quarter. Operating profit was $148 million, up 17.1% year over year.
Financials
Cash and cash equivalents were $461 million as of Sep 30, 2017, down 27.7% year over year. Long-term debt was up 2.2% to $2,954 million as of Sep 30, 2017. Capital expenditure in the quarter was $64 million.
Celanese generated operating cash flow of $255 million and free cash flow of $181 million. During the quarter, the company returned $262 million to shareholders, including $62 million of dividends.
Outlook
Moving ahead, the company expects business and productivity momentum to offset fourth-quarter weakness. Celanese is optimistic that it can grow its adjusted earnings per share for 2017 towards the top end of its earlier announced guidance range of 9-11%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to two lower.
VGM Scores
At this time, Celanese 's stock has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. 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.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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