Why Is Celanese (CE) Up 14.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Celanese (CE). Shares have added about 14.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Celanese 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 drivers.
Celanese's Q1 Earnings & Revenues Surpass Estimates
Celanese reported first-quarter 2023 earnings from continuing operations of 86 cents per share, plunging from $4.61 in the prior-year quarter.
Adjusted earnings in the first quarter were $2.01 per share, down 63.7% from $5.54 reported a year ago. The bottom line, however, surpassed the Zacks Consensus Estimate of $1.66.
Revenues of $2,853 million increased roughly 12.4% year over year and surpassed the Zacks Consensus Estimate of $2,720.1 million.
The company witnessed increased volumes sequentially in the quarter due to an additional month of sales from the M&M acquisition as well as demand recovery in Europe and Asia in the reported quarter.
Segment Highlights
Net sales in the Engineered Materials unit were $1,630 million in the reported quarter, up around 79.1% year over year. The segment reported an operating profit of $112 million, adjusted EBIT of $215 million and operating EBITDA of $327 million in the first quarter.
The Acetyl Chain segment posted net sales of $1,250 million, down roughly 24.3% year over year. The segment generated an operating profit of $278 million, adjusted EBIT of $316 million and operational EBITDA of $370 million in the first quarter.
Financials
Celanese ended the quarter with cash and cash equivalents of $1,167 million, down roughly 22.6% sequentially. Long-term debt was up around 0.2% to $13,396 million.
Cash used in operating activities was $96 million and free cash flow was a negative $261 million in the reported quarter. Capital expenditures amounted to $164 million in the quarter.
Outlook
Celanese sees adjusted earnings of around $2.50 per share for the second quarter of 2023. The projection includes the expected roughly 30 cents impact from the M&M amortization. It expects sequential earnings growth in its businesses.
Due to increased business performance and the timing of cash items, the company forecasts a considerable improvement in free cash flow in the second quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -12.55% due to these changes.
VGM Scores
At this time, Celanese has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Celanese has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Celanese belongs to the Zacks Chemical - Specialty industry. Another stock from the same industry, Element Solutions (ESI), has gained 8.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Element Solutions reported revenues of $574.4 million in the last reported quarter, representing a year-over-year change of -15.6%. EPS of $0.30 for the same period compares with $0.38 a year ago.
For the current quarter, Element Solutions is expected to post earnings of $0.32 per share, indicating a change of -15.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -4.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Element Solutions. Also, the stock has a VGM Score of B.
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