U.S. Markets closed

Celanese (CE) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

Celanese Corporation CE is set to release first-quarter 2019 results after the bell on Apr 22.

The chemical and specialty materials maker saw its earnings from continuing operations (as reported) drop around 51% year over year in the fourth quarter of 2018.

Adjusted earnings of $2.38 a share for the quarter rose 20% from $1.98 in the year-ago quarter. It, however, trailed the Zacks Consensus Estimate of $2.42.

Revenues went up roughly 6% year over year to $1,689 million but lagged the Zacks Consensus Estimate of $1,730.4 million.

Celanese has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a positive average earnings surprise of roughly 11.3%.

Celanese’s shares have lost 5.2% over a year, underperforming its industry’s 4.9% rise.


 

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

Factors to Watch For

Celanese, in its fourth-quarter call, said that it expects adjusted earnings per share for 2019 to be roughly $10.50, considering a slower start and expected moderation during the fourth quarter of 2019. Celanese witnessed economic weakness, mainly across Europe and Asia, during the fourth quarter and expects this sluggishness to continue through the first-half of 2019.

Celanese’s revenues for the first quarter are projected to decline 4.4% year over year, as the Zacks Consensus Estimate is currently pegged at $1,770 million.

Celanese’s strategic measures including cost savings through productivity initiatives, price increase actions and efficiency enhancement are expected to support its earnings in the first quarter. Its bottom line is expected to be aided by productivity actions and operational improvement.

The company’s Engineered Materials (EM) unit is poised for growth on the back of recent acquisitions, new business wins, growth in Asia and significant project commercialization.

Celanese also continues to actively pursue acquisitions, which are providing it opportunities for additional growth, investment and synergies. The acquisitions of SO.F.TER., Nilit and Omni Plastics are expected to significantly contribute to earnings expansion in the EM segment.

For the first quarter, net sales in the EM division are projected to increase roughly 3.9% year over year as the Zacks Consensus Estimate for the same is currently pegged at $691 million.

However, Celanese faces pricing pressure in its Acetate Tow segment. Low utilization rates across the tow industry are affecting the prices of acetate tow. Demand and utilization rates remain subdued across the tow industry. As such, margins for the Acetate Tow unit are expected to remain under pressure in the to-be-reported quarter.

Net sales in the Acetate Tow division is projected to decline 4.2% as the Zacks Consensus Estimate currently stands at $161 million for the first quarter.  

The company is also exposed to margin pressure from raw material cost inflation as well as elevated energy and logistic costs. Input cost pressure is unlikely to subside in the first quarter. Celanese is taking pricing actions amid an inflationary environment.

Earnings Whispers

Our proven model does not show that Celanese is likely to beat estimates this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:

Earnings ESP: Earnings ESP for Celanese is -4.66%. This is because the Most Accurate Estimate is currently pegged at $2.37 while the Zacks Consensus Estimate stands at $2.49. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Celanese currently carries a Zacks Rank #2, which when combined with a negative ESP, makes surprise prediction difficult.  

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.

Celanese Corporation Price and EPS Surprise

 

Celanese Corporation Price and EPS Surprise | Celanese Corporation Quote

Stocks to Consider

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

Arconic Inc. ARNC has an Earnings ESP of +0.65% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AK Steel Holding Corporation AKS has an Earnings ESP of +8.72% and carries a Zacks Rank #3.

Ingevity Corporation NGVT has an Earnings ESP of +6.77% and carries a Zacks Rank #3.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

See Latest Stocks Today >>


Is your investment advisor fumbling your financial future?
See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.” Click to get your free report.
 
Celanese Corporation (CE) : Free Stock Analysis Report
 
Ingevity Corporation (NGVT) : Free Stock Analysis Report
 
Arconic Inc. (ARNC) : Free Stock Analysis Report
 
AK Steel Holding Corporation (AKS) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research