Celanese Corporation CE is benefiting from its productivity measures, investments in organic projects and strategic acquisitions amid certain headwinds including higher raw material costs.
Shares of this leading chemical and specialty materials maker are down 41.8% over a year compared with the 26.7% decline of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
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What’s Going in CE’s Favor?
Celanese is gaining from its cost and productivity actions, investments in high-return organic projects and synergies of acquisitions. The company is also benefiting from higher pricing across its segments.
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. Celanese expects the acquisition to be accretive to its 2022 adjusted earnings per share and free cash flow.
Celanese, in Feb 2022, also entered into an agreement with DuPont to acquire the majority of the latter’s Mobility & Materials segment for cash proceeds of $11 billion. Through this deal, Celanese will be able to enhance its growth in high-value applications. It expects to achieve run-rate synergies of around $450 million within the first four years following the completion of the deal. The buyout is expected to be immediately accretive to the company’s adjusted earnings per share.
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.
A Few Headwinds
Celanese is exposed to headwinds from raw material cost inflation due to supply constraints. It is witnessing sustained inflation across many key raw materials as well as supply chain costs. Tight availability is expected to keep raw material costs elevated over the near term. Headwinds from higher input, energy and logistics costs are expected to continue in the third quarter of 2022. The company is also seeing continued moderation in acetic acid pricing, which is expected continue in the third quarter.
The semiconductor shortage is also hurting automotive OEM production around the world. The chip crisis has been exacerbated by the Russia-Ukraine conflict. Global automotive build rates declined in the second quarter of 2022, hurt by the pandemic-led lockdowns in China and the chip crisis. Weaker automotive production is likely to affect the company’s automotive order patterns over the near term.
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 Livent Corporation LTHM, Albemarle Corporation ALB and Sociedad Quimica y Minera de Chile S.A. SQM.
Livent, currently sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 667% for the current year. The Zacks Consensus Estimate for LTHM’s current-year earnings has been revised 9.5% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Livent’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 15.7%. LTHM has gained around 30% in a year.
Albemarle, sporting a Zacks Rank #1, has a projected earnings growth rate of 425.3% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 63.7% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 21% in a year.
Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.
Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 68% in a year. The company carries a Zacks Rank #2 (Buy).
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