BOJA vs. SBUX: Which Stock Should Value Investors Buy Now?
It has been about a month since the last earnings report for Celanese Corporation CE. Shares have added about 1.7% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is CE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Celanese logged earnings from continuing operations of $2.68 per share for the first quarter of 2018, a roughly two-fold increase from $1.30 per share a year ago.
Earnings, barring one-time items, were $2.79 per share, a 54% surge from $1.81 per share posted a year ago. It topped the Zacks Consensus Estimate of $2.36.
Revenues of $1,851 million were up roughly 26% year over year, also outpacing the Zacks Consensus Estimate of $1,696 million.
The company benefited from gains across its Engineered Materials (EM) and Acetyl Chain units in the quarter. Improving industry fundamentals and the strength of the company’s commercial models also supported the results.
Sales from the EM unit jumped 29% year over year to a record $665 million in the quarter. Segment income went up around 21% year over year to $182 million. Growth in Asia, recent acquisitions and pipeline commercialization contributed to the division’s earnings. The company commercialized a record 742 projects in EM during the quarter, up 45% year over year, and is on track to deliver roughly 3,000 project wins in 2018.
Celanese saw lower volume and pricing in the quarter in its Acetate Tow segment. Segment income was $78 million, down roughly 16% year over year.
The Acetyl Chain segment saw net sales of more than $1 billion in the quarter, up around 32% year over year. Segment income was $253 million, a more than two-fold year over year rise. The division gained from improving industry fundamentals as well as higher volumes and pricing in the quarter. Improving global supply and demand dynamics in the industry contributed to profitability.
Celanese ended the quarter with cash and cash equivalents of $490 million, down around 2% year over year. Long-term debt was up 17% year over year to $3,343 million.
Celanese generated operating cash flow of $143 million and free cash flow of $55 million. Capital expenditure for the quarter was $86 million. Moreover, the company returned $63 million to shareholders through dividends in the quarter.
Celanese raised its earnings guidance for 2018 based on strength across its Acetyl Chain and EM units. The company now envisions its adjusted earnings per share to grow in the 20-25% range year over year in 2018, up from its earlier view of 12-16% growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter.
Celanese Corporation Price and Consensus
Celanese Corporation Price and Consensus | Celanese Corporation Quote
At this time, CE has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise CE has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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