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Celanese's (CE) Earnings and Sales Trail Estimates in Q4

Zacks Equity Research

Celanese Corporation CE recorded earnings from continuing operations of 73 cents per share in the fourth quarter of 2018, down around 51.3% from $1.50 in the year-ago quarter.

Barring one-time items, adjusted earnings were $2.38 a share, up 20.2% from $1.98 in the year-ago quarter. The figure, however, trailed the Zacks Consensus Estimate of $2.42.

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

2018 Highlights

Adjusted earnings rose 46.5% year over year to $11 per share for 2018. Net sales increased 16.5% year over year to $7,155 million.

The chemical maker’s financial performance was driven by strong contributions from the Acetyl Chain and Engineered Materials units.

Celanese Corporation Price, Consensus and EPS Surprise

 

Celanese Corporation Price, Consensus and EPS Surprise | Celanese Corporation Quote

 

Segment Review

Net sales in the Engineered Materials unit went up 7.2% year over year to $622 million in the quarter. Segment income went down around 3.1% year over year to $95 million. The company commercialized 866 projects during the quarter, up 48% year over year. Going forward, Celanese expects margins to recover from fourth-quarter levels, courtesy of lower raw material costs and more normalized regional sales mix.   

Net sales in Acetate Tow segment rose 2.5% year over year to $161 million, while income declined 53.7% to $19 million. Lower income was mainly due to the impact of higher acetyls raw material costs along with an inventory build in fourth-quarter 2017.

The Acetyl Chain segment posted net sales of $936 million in the quarter, up around 5% year over year. The results benefited from price increase actions. Segment income was $211 million, up around 21% year over year. Integrated product chain along with a global supply network positioned the segment to expand pricing in excess of raw material increases.

Financials

Celanese ended the quarter with cash and cash equivalents of $439 million, down around 23.8% year over year. Long-term debt was down 10.4% year over year to $2,970 million.

Celanese generated operating cash flow of $1.6 billion and free cash flow of $1.2 billion for 2018. Capital expenditure totaled $337 million for the year. Moreover, the company returned $1.1 billion to shareholders through dividends and share repurchases.

Outlook

Celanese projects adjusted earnings per share (EPS) for 2019 to be roughly $10.50, considering a slower start and expected moderation during the fourth quarter of 2019.  

Overall, the company’s underlying fundamentals and expected demand for products and solutions-based businesses are strong. Celanese is also optimistic to earn $12 per share in 2020 on the back of strength of business models, contributions from planned acquisition and organic investment projects.

Price Performance

Celanese’ shares have lost 12.1% in the past year compared with the industry’s decline of 6.4%.



Zacks Rank & Key Picks

Celanese currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the basic materials space include Ingevity Corporation NGVT, Quaker Chemical Corporation KWR and Israel Chemicals Ltd. ICL. While Ingevity sports a Zacks Rank #1 (Strong Buy), Quaker Chemical and Israel Chemicals carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has an expected earnings growth rate of 21.5% for 2019. The company’s shares have gained 22.7% in the past year.

Quaker Chemical has an expected earnings growth rate of 21.1% for 2019. Its shares have moved up 27.3% in a year’s time.

Israel Chemicals has an expected earnings growth rate of 5.4% for 2019. Its shares have rallied 33.8% in a year’s time.

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