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Celanese (CE) to Post Q3 Earnings: What's in the Offing?

Zacks Equity Research

Celanese Corporation CE is set to release third-quarter 2019 results after the bell on Oct 21. The company’s results will likely reflect the benefits of its productivity and operational improvement actions. However, a soft demand environment is likely to have impacted its performance in the quarter.

The leading chemical and specialty materials maker beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while missed once. In this timeframe, it delivered an average positive surprise of around 3%.

Celanese’s shares have gained 35.1% year to date, outperforming its industry’s 17% rise.


 

Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

Celanese’s revenues for the third quarter are projected to decline 8.2% year over year, as the Zacks Consensus Estimate is currently pegged at $1,624 million.

Net sales in the company’s Engineered Materials (EM) division are projected to decline roughly 2.6% year over year as the Zacks Consensus Estimate for the same is currently pegged at $625 million for the third quarter.

Net sales in the Acetate Tow division is projected to fall around 0.6% as the Zacks Consensus Estimate currently stands at $157 million.  

For the Acetyl Chain segment, net sales are projected to decline roughly 10% year over year as the Zacks Consensus Estimate for the same is currently pegged at $901 million.

Factors at Play

Celanese faces a sluggish demand environment, partly due to weakness across Europe and Asia. It witnessed a slowdown in demand in the second quarter across several end markets, especially automotive and electronics. Lower demand may have continued to hurt sales in its EM and Acetyl Chain units in the third quarter.

Celanese also faces some pressure in its Acetate Tow segment. Low utilization rates across the tow industry are affecting volumes of acetate tow. Demand remains subdued in the tow industry. This might reflect on third-quarter volumes of the Acetate Tow unit.

However, Celanese is committed to execute its productivity programs that include implementation of a number of cost reduction capital projects. Its strategic actions including cost savings through productivity initiatives, price increase actions and operational improvement are likely to have contributed to its bottom line in the September quarter. Benefits of acquisitions and project commercialization are also expected to get reflected on third-quarter results.

Celanese Corporation Price and EPS Surprise

 

Celanese Corporation Price and EPS Surprise

Celanese Corporation price-eps-surprise | Celanese Corporation Quote

 

Zacks Model

Our proven model does not conclusively predict an earnings beat for Celanese this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here as you will see below:
 
Earnings ESP: Earnings ESP for Celanese is -1.64%. This is because the Most Accurate Estimate is currently pegged at $2.46 while the Zacks Consensus Estimate stands at $2.50. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: Celanese carries a Zacks Rank #4 (Sell). Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Agnico Eagle Mines Limited AEM, scheduled to release earnings on Oct 23, has an Earnings ESP of +7.93% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross Gold Corporation KGC, scheduled to release earnings on Nov 6, has an Earnings ESP of +25.93% and carries a Zacks Rank #1.

Barrick Gold Corporation GOLD, scheduled to release earnings on Nov 6, has an Earnings ESP of +1.89% and carries a Zacks Rank #3.

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