Celanese (CE) Shares Up 21% YTD: What's Driving the Stock?
Celanese Corporation’s CE shares have gained 21.4% so far this year. The company has also outperformed its industry’s rise of 5.7% over the same time frame. It has also topped the S&P 500’s 13.5% 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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Acquisitions, Productivity Aid CE
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 $109 million to the company’s operating EBITDA in second-quarter 2023. Celanese sees a $25-$35 million sequential increase in operating EBITDA contribution in the third 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 during the second half of 2023. The company's incremental cost actions are expected to deliver $60-$80 million in savings in the second half.
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. Celanese also returned $297 million to shareholders through dividend payouts during 2022. Cash flow from operating activities climbed 54% year over year to $762 million in the second quarter of 2023. CE also returned roughly $152 million to shareholders through dividend payouts during first-half 2023. Moreover, it reduced its net debt by $515 million in the second 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 Koppers Holdings Inc. KOP, Carpenter Technology Corporation CRS and The Andersons Inc. ANDE.
Koppers has a projected earnings growth rate of 7.5% for the current year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Koppers has a trailing four-quarter earnings surprise of roughly 21.7%, on average. KOP shares have surged around 77% in a year.
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #2.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 101% over the past year.
Andersons currently carries a Zacks Rank #2. The Zacks Consensus Estimate for ANDE's current-year earnings has been revised 3.3% upward over the past 60 days.
Andersons beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 64.4%, on average. ANDE shares have rallied around 50% in a year.
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