Celanese Corporation CE is benefiting from its productivity measures, investments in organic projects and strategic acquisitions amid headwinds from demand softness.
Shares of this leading chemical and specialty materials maker are down 31.4% over a year compared with the 5.3% decline of its industry.
Image Source: Zacks Investment Research
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Acquisitions, Productivity to Aid Results
Celanese is gaining from its cost and productivity actions, investments in high-return organic projects and synergies of acquisitions.
The company 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 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. The buyout is expected to contribute to volumes in the Acetyl Chain segment.
The purchase of Exxon Mobil's Santoprene business also broadens 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.
The acquisition of the majority of DuPont’s Mobility & Materials (“M&M”) business also enables Celanese to enhance its growth in high-value applications. The company expects M&M to contribute $130-$140 million to its operating EBITDA in second-quarter 2023.
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 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. It also paid dividend worth $76 million during the first quarter of 2023.
Weak Demand Ails
The company faces challenges from demand softness and destocking. While the conditions improved in China and Europe in the first quarter of 2023, demand moderated in the Americas towards the end of the first quarter and is expected to be sluggish in the second quarter. Celanese is also seeing destocking in the Americas that continued into the second quarter. This might impact performance in the second quarter. Weaker demand recovery globally and destocking are likely to weigh on the company’s volumes and pricing.
Celanese Corporation Price and Consensus
Celanese Corporation price-consensus-chart | Celanese Corporation Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include AngloGold Ashanti Limited AU, L.B. Foster Company FSTR and Linde plc LIN.
AngloGold Ashanti currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for AU’s current-year earnings has been revised 22% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for current-year earnings for AU is currently pegged at $1.94, reflecting an expected year-over-year growth of 50.4%. AngloGold Ashanti’s shares have popped roughly 37% in the past year.
L.B. Foster currently carries a Zacks Rank #1. The Zacks Consensus Estimate for FSTR's current-year earnings has been stable over the past 60 days.
L.B. Foster’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 140.5%, on average. FSTR has gained around 2% in a year.
Linde currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 3.8% upward in the past 60 days.
Linde beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 6.9% on average. LIN’s shares have gained roughly 10% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report