Celanese Corporation’s CE stock seems to be a solid bet now based on its strong fundamentals and compelling growth prospects. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let’s delve deeper into the factors that make this chemical company an attractive choice for investors right now.
What’s Working in Favor of CE?
Solid Rank & VGM Score: Celanese currently carries a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.
An Outperformer: Celanese has outperformed the industry over the past two years. The company’s shares have gained around 29.9% over this period, compared with roughly 9.8% growth recorded by the industry.
Positive Earnings Surprise History: Celanese has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of roughly 13.3%.
Healthy Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for Celanese is currently pegged at $11.10, reflecting an expected year-over-year growth of 47.8%. Moreover, earnings are expected to register a 23.2% growth in fourth-quarter 2018. The company also has an expected long-term earnings per share growth rate of 10%.
Attractive Valuation: Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Celanese is currently trading at trailing 12-month EV/EBITDA multiple of 9, much cheaper compared with the industry average of 21.2.
Superior Return on Equity (ROE): Celanese’s ROE of 39.4%, as compared with the industry average of 16.8%, manifests the company’s efficiency in utilizing shareholders' funds.
Buoyant Outlook: Celanese, in October, raised its adjusted earnings per share guidance for 2018 to roughly $10.90-$11.10 from its earlier view of $10.50-$10.75 factoring in strength in its Engineered Materials (EM) and Acetyl Chain units. The company expects the momentum in Acetyl Chain and EM to continue in the rest of 2018. The EM segment is expected to keep the pace of earnings growth with traction from new projects and bolt-on acquisitions.
The company’s strategic measures including cost savings through productivity actions and efficiency enhancement are expected to continue to drive its earnings. Its bottom line is expected to be driven by productivity actions, price hike initiatives and operational improvement. Celanese expects to achieve productivity savings of $40-$50 million by 2020.
Celanese also remains focused on growth through acquisitions. The acquisition of Omni Plastics L.L.C. and its subsidiaries has strengthened Celanese’s global asset base by adding compounding capacity in the Americas, which will allow the company to continue supporting a diverse and growing customer base.
Celanese also continues to generate strong cash flows and remains focused on returning value to its shareholders. Celanese generated free cash flow of $382 million in the third quarter and returned $223 million to shareholders through dividends and share repurchases. The company expects to deliver free cash flow of nearly $1.2 billion in 2018.
Celanese Corporation Price and Consensus
Celanese Corporation Price and Consensus | Celanese Corporation Quote
Other Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include The Mosaic Company MOS, CF Industries Holdings, Inc. CF and Methanex Corporation MEOH, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mosaic has expected long-term earnings growth rate of 7%. Its shares have surged 44% in the past year.
CF Industries has expected long-term earnings growth rate of 6%. Its shares have gained 17% in a year.
Methanex has expected long-term earnings growth rate of 15%. Its shares have gained 7% in the past year.
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